An advert which suggested that people would do better to put their money into bricks and mortar than keep it in the bank has landed an estate agent in trouble.
Aldermartin Baines & Cuthbert, of Bushey Heath, Hertfordshire, ran the advert on radio after getting clearance from the Commercial Radio Companies Association.
The voice-over stated: "The bank may be the safest place for your money, but Aldermartin Baines and Cuthbert estate agents would argue that it's not the most sensible place.
€If you have cash on deposit in the bank, you may be getting only half a per cent interest on your money and inflation will be working against you by eroding your savings. So, what's the alternative? Here at ABC Estates we'd like to suggest investing in property, good old bricks and mortar.
€Put your savings in a buy-to-let investment instead and you could generate a 5% return on your investment, maybe more. Inflation would then actually work for you by eroding the value of your mortgage debt."
Three members of the public complained to the Advertising Standards Authority, saying the advert was misleading because it did not make it clear that there were risks associated with investments. Two of the complainants believed the advert misleadingly presented buy-to-let as a low-risk investment.
Two of the complainants also challenged whether the advertiser was regulated by the Financial Services Authority (FSA) and, if not, whether the ad was suitable to be broadcast on radio.
Aldermartin Baines & Cuthbert (ABC) told the ASA that they offered many properties that reflected yields of between 7% and 12% but had been guided to suggest a 5% yield, which was very conservative and definitely deliverable.
They had also been very careful to ensure the ad spoke in very general terms and did not guarantee any return or yield. ABC also said that accountants and financial advisers had contacted them and commended them on the advert.
They did not accept that the ad misleadingly presented buy-to-let as a low risk investment. They said the ad did not mention €low risk' but instead focused on the issues of inflation eroding the value of money, either on deposit or as the debt of a mortgage. They said that was entirely obvious and would not be misleading to anyone. Nevertheless, the investments were low risk, because they gave an independent insurance backed rent guarantee.
That meant that if a tenant stopped paying their rent the landlord would receive the rental fee via insurance as well as funds for a legal team to evict the tenant.
ABC said that if a deal was considered risky, banks would not lend on it particularly in the current economic climate.
The Commercial Radio Companies Association said they were happy with the advert. Their view was it had been carefully worded so as not to misleadingly imply that investing in a buy-to-let property was low risk or risk-free.
They said the advert was for buy-to-let property promoted as a buy-to-let 'investment'. They understood that buy-to-let property was outside the FSA's remit because it was an 'investment' not felt to be in need of FSA regulation. They did not feel that banning such adverts from radio would be fair or proportionate.
The ASA noted ABC's and the CRCA's comments, but upheld all the complaints and banned the advert.
The ASA said the risks involved were not limited to tenants not paying their rent, for example, and felt that the overall impression was that the advert presented buy-to-let investment as an alternative, or a preferable option, to saving.
The ASA considered the advert misleadingly presented buy-to-let investment as low risk and did not make clear the potential risks associated with such an investment.
The ASA noted that buy-to-let property was not regulated but considered the advert nevertheless promoted an investment.
Aldermartin Baines & Cuthbert, of Bushey Heath, Hertfordshire, ran the advert on radio after getting clearance from the Commercial Radio Companies Association.
The voice-over stated: "The bank may be the safest place for your money, but Aldermartin Baines and Cuthbert estate agents would argue that it's not the most sensible place.
€If you have cash on deposit in the bank, you may be getting only half a per cent interest on your money and inflation will be working against you by eroding your savings. So, what's the alternative? Here at ABC Estates we'd like to suggest investing in property, good old bricks and mortar.
€Put your savings in a buy-to-let investment instead and you could generate a 5% return on your investment, maybe more. Inflation would then actually work for you by eroding the value of your mortgage debt."
Three members of the public complained to the Advertising Standards Authority, saying the advert was misleading because it did not make it clear that there were risks associated with investments. Two of the complainants believed the advert misleadingly presented buy-to-let as a low-risk investment.
Two of the complainants also challenged whether the advertiser was regulated by the Financial Services Authority (FSA) and, if not, whether the ad was suitable to be broadcast on radio.
Aldermartin Baines & Cuthbert (ABC) told the ASA that they offered many properties that reflected yields of between 7% and 12% but had been guided to suggest a 5% yield, which was very conservative and definitely deliverable.
They had also been very careful to ensure the ad spoke in very general terms and did not guarantee any return or yield. ABC also said that accountants and financial advisers had contacted them and commended them on the advert.
They did not accept that the ad misleadingly presented buy-to-let as a low risk investment. They said the ad did not mention €low risk' but instead focused on the issues of inflation eroding the value of money, either on deposit or as the debt of a mortgage. They said that was entirely obvious and would not be misleading to anyone. Nevertheless, the investments were low risk, because they gave an independent insurance backed rent guarantee.
That meant that if a tenant stopped paying their rent the landlord would receive the rental fee via insurance as well as funds for a legal team to evict the tenant.
ABC said that if a deal was considered risky, banks would not lend on it particularly in the current economic climate.
The Commercial Radio Companies Association said they were happy with the advert. Their view was it had been carefully worded so as not to misleadingly imply that investing in a buy-to-let property was low risk or risk-free.
They said the advert was for buy-to-let property promoted as a buy-to-let 'investment'. They understood that buy-to-let property was outside the FSA's remit because it was an 'investment' not felt to be in need of FSA regulation. They did not feel that banning such adverts from radio would be fair or proportionate.
The ASA noted ABC's and the CRCA's comments, but upheld all the complaints and banned the advert.
The ASA said the risks involved were not limited to tenants not paying their rent, for example, and felt that the overall impression was that the advert presented buy-to-let investment as an alternative, or a preferable option, to saving.
The ASA considered the advert misleadingly presented buy-to-let investment as low risk and did not make clear the potential risks associated with such an investment.
The ASA noted that buy-to-let property was not regulated but considered the advert nevertheless promoted an investment.
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