Last month, a letter came into our office from an organisation that had the look and feel of a government department. They were offering “term investments” with the benefits of competitive fixed investment rates, flexible investment terms, monthly income payments and no entry or exit fees.

You’d be excused for thinking that the offer was for secure term deposits with a government guarantee.

However, the company offering the product has nothing to do with a government body and the investment has nothing to do with term deposits.

In fact, the fine print says: “this is not a bank deposit or common fund. An investment may achieve lower than expected returns. There is a risk that withdrawal proceeds may not be paid within a reasonable period after the end of a fixed term. Investors risk losing some or all of their principal investment.”

So where is your money being invested? As they say, “in cash and mortgaged investments.”

This investment reminds me of what ACR (Australian Capital Reserve) was doing some years ago pre-GFC. You may recall that this company went bust, lost their investors money and no longer exists.

I don’t have an issue with this company offering an investment of this type. They have a place in the investment universe and there are investors who want this type of asset within their portfolios.

What I am bothered by is the way which this is marketed to the public. While they are not breaking any rules per se in the eyes of ASIC, they are skating pretty close to the line. Many inexperienced and unwary people would be easily duped by the way this company is portraying itself.

The lesson for investors here is to read the fine print and if you don’t have time for that, get financial advice from your trusted adviser.