There is a company based in Cape Town called Treoc, which runs so-called investor clubs and sells so-called property investments.
The company is headed by one Coert Coetzee. On the Treoc website and in articles published in among other places, Comic Life, the official magazine of the airline Kulula.com, this self-acclaimed property guru advises all and sundry to cancel their life assurance policies and to invest in property through one of the structures offered by one of the Treoc companies.
This is plain bad advice. I would love to know how one of the associated companies, Treoc Risk Managers, managed to get a financial service provider's licence to offer financial advice and products to the public. Treoc is licensed to sell long-term insurance, short-term insurance and retail pension benefits.
It is interesting that Coetzee should be calling on people to cancel their life assurance policies while one of his companies has a licence to sell these products.
His advice to cancel policies is without qualification. He does not say whether these are risk policies covering death and disability and/or investment policies.
He gives a few bad examples of atrocious investment returns on life policies, which were invested in offshore investments when the rand was at its weakest.
As readers will know, I have long been critical of the high costs of life assurance investment (endowment) policies which have chewed into your investment returns, but most life assurance investments, when held to maturity, do provide you with above-inflation returns.
You will have done better in unit trusts with similar underlying investments, simply because they have lower costs.
But there is still the issue of the confiscatory penalties that life assurance companies will levy if you cancel a policy or reduce the premiums you pay before the date of maturity.
So here we have Coetzee advising people to trade in policies, no doubt to invest in his very dubious property investment products. This could result in you losing up to 30 percent of the value of your investment.
And what is of further concern is the structure of the property product that Coetzee flogs.
It is extremely complex and it is built around the creation of two trusts with serious and unexplained tax consequences for investors. The product, incidentally, is unregulated. But he makes it all sound very great at the seminars he holds around the country.
And what is more interesting is that he charges you R2 995 to listen to his appalling advice. You can even join his investor club at a minimum fee of R1 460 and receive regular newsletters in which he will tell you to trade in your policy so that you can invest in his property products.
My view is that you should be extremely cautious of any of these structured property investment products, be it the Treoc product or one of the many other packaged property investments, including property syndications, that are currently being flogged.