Georgie Harris, CEO, founded Hackstons by bringing together a wide range of physical asset experts in order to make investing accessible.
In an age where alternative investments are on the rise and diversifying portfolios continue to captivate, I see the cask whisky investment market emerging as a potentially lucrative opportunity. Historically, many see Scotch whisky as a symbol of time-honored craftsmanship.
However, as alternative investments like whisky gain momentum, a pivotal question arises: Which companies can I trust?
Last year, a British con artist made $13 million by promising older American investors the opportunity to own illustrious, investment-grade Bordeaux wine and Scotch whisky. Unfortunately, this isn’t a one-off. A quick Google search for ‘whisky scams’ will return multiple stories where scam artists have conned would-be investors out of their hard-earned money.
Drawing on my personal experience in this sector, I’d like to highlight the potential pitfalls and scam risks to look out for that have, at times, cast a shadow over this industry. In a landscape where trust and transparency are paramount, having a tangible understanding of the risks associated with companies that facilitate whisky cask investments is key.
It’s important to practice rigorous due diligence and keep a discerning eye when considering entering this market. Here are three things to look out for:
1. No Face Time
Regardless of the industry in which they operate, for any company that offers a product or service, trust is paramount. The positive impact of face-to-face meetings on the rapport and trust-building process cannot be overstated.
While there are undoubtedly a number of legit and trustworthy companies that focus on cask whisky investment, there are many that aren’t. From my experience, companies that actively attempt to deter potential customers from visiting the office and meeting with their team in a face-to-face capacity are essentially throwing red flags at you.
This is not just unique to the whisky investment industry; this applies to any company that is asking you to part with money but isn’t keen for you to meet them. It just so happens that in the whisky industry, it’s often a larger sum of money that you will be investing, so extra diligence is even more essential.
Any organization that is forthright in their offer for you to visit their offices, meet their team and see what they’re all about is often more likely to be a legitimate and trustworthy avenue for investment.
2. Prices That Seem Too Good To Be True
Regardless of the product or industry, price is the determining factor for a majority of consumers, and even more important than trust. This of course makes sense, for everyone wants the best deal. But as the old adage goes: “if it seems too good to be true, it probably is.” This rings true for cask whisky investment as much as any other industry.
Most people who are new to whisky investment will contact several companies to find out more about the market, including prices. While there might be slight differences in prices, particularly in a market that considers so many variables to determine value—age, the finish and the distillery to name a few— there usually won’t be a stark contrast between prices that legitimate companies offer for the same cask. Illegitimate companies, however, are much more likely to offer drastically reduced prices for the same stock.
If you’re speaking with a company that offers you a cask for a markedly reduced rate compared to other firms, it should serve as a warning. Why is their price so low? Typically, an outlier in price indicates a potential scam.
3. Lack Of Testimonials, Reviews And Real-World Social Proof
According to the Edelman Trust Barometer Report, 75% of people with high brand trust say they will buy the brand’s product even if it isn’t the cheapest. This demonstrates just how important social proof is in establishing trust and building customer relationships.
Social proof at its very core is advocacy for a business or service from current clients or consumers. These might take the form of Google or Trustpilot reviews, video testimonials or referrals, and they are of pivotal importance to potential clients. In fact, 76% of consumers “regularly” read online reviews when browsing for local businesses, a good practice for anyone poised to purchase a new product, invest in a new asset or work with a new company.
Legitimate whisky investment companies understand this, and speaking from personal experience, will take joy in receiving testimonials from clients. As such, they will make a conscious effort to collect this feedback, provide social proof and identify where they can improve their business. Unscrupulous companies on the other hand will pay much less attention to this.
Ultimately, a company with hundreds of five-star Trustpilot reviews and multiple video testimonials from happy clients is more likely to be running a bonafide operation than those with little or no reviews or testimonials. Social proof is quite literally your clients vouching for the service that you claim to provide.
Conclusion
These are just three of the most salient indicators to look for when it comes to better determining a scam in the whisky investment space and is by no means a complete list. The key takeaway from this piece is to carry out your own rigorous due diligence to find a transparent and reputable company to work with.
Companies specializing in this market will ensure they’re running all the necessary checks to keep both you and themselves safe during this process. You want to work with a business that isn’t just experts in their field, but always making sure to meet clients, run rigorous anti-money laundering checks and offer premium insurance and storage policies to reduce your risk of falling victim to scams in this flourishing market.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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