How Did London Capital & Finance (LCF) Take Hundreds of Millions of Investors Money?

London Capital & Finance was based in Tunbridge Wells and grew massively from 2015 with over 11,600 investors placing their money at rates up to 8%

How does a small unknown company based in a sleepy Kent town grow from nothing to take £237 million from savers in 3 years?

I think it essentially boils down to two words – name and service. The people behind London Capital & Finance (LCF) may have been running a Ponzi scam but they appear to have thought very carefully about how they planned it and made sure that they appealed to their target audience. In my view the LCF story was by no means accidental, it had a serious amount of planning to make sure that they obtained the maximum money for as long as possible. Once things have reached the courts I suspect it would make a gripping TV drama with the personalities involved.

The Slick Sales Operation That Took £237 million from Savers

LCF were very clever to choose a name that associated them with the City of London and gave the impression that they were much bigger & prestigious than they actually were. Sponsorship of top class events at English Heritage sites such as Osborne House gave further credibility. There was also a well-known company called London Capital Group which could affect searches for the name on Google. Would they have raised so much money with their original name Southern Counties Sales Finance? I don’t think that has the same ring to it which I’m sure is why they chose the name they did.

London Capital & Finance sponsorship of Bede Horse trials

Another issue with names is the confusion between ISAs and bonds. Bond is one of the most misused words in finance, at one end it is used by banks for deposit accounts, companies use it for corporate loan notes traded on the stock market known as corporate bonds and companies like LCF use it for the sale of mini bonds – high risk untraded loans. This gives a massive scope for confusion when savers associate the word bond with bank savings when the product is nothing of the sort.

With the advert below from their website, I think LCF very clearly knew that by separating out ISAs and Bonds it would create confusion. If they put that bonds meant capital at risk then people may not realise that the ISA also was invested in the same underlying bonds with the same risks.

How LCF Took Hundreds of Millions of Investors Money

Further confusion comes from the use of ISA for multiple products which range from cash ISAs that are fully FSCS protected to FCA regulated Stocks & Shares ISAs that have partial FSCS protection to Innovative Finance (IF) ISAs that have no FSCS protection and are essentially unregulated. 

I'm sure that LCF had realised that if they applied to FCA to be regulated for an unrelated product that they would be able to display the FCA Regulated symbol and registration number to give them more credibility despite it having no relevant to the bonds they were selling. This is a serious flaw in the FCA systems.

The ISAs sold by LCF came under the Innovative Finance (IF) ISA product but most investors had no clue about these and assumed all ISAs were cash ISAs that were protected by FSCS despite the words "capital at risk" appearing on the adverts.

The Slick Sales Operation That Took £237 million from Savers

Top Class Personal Service & UK Account Managers

The second thing that is clear is that they understood the importance of service for building their reputation and making sure everyone knew about that by leaving reviews on sites. Although the staff were employed by Surge Financial not LCF, investors were allocated a dedicated Account Manager who they could call to discuss their investment. When LCF went into administration many investors were genuinely shocked and disbelieving that anything could be wrong with the company that had supposedly treated them so well. The reality about it being a scam has come as a serious blow to confidence when they trusted the people they were dealing with.

From speaking to various bondholders and seeing the information that they were sent about LCF it’s clear that it was an incredibly well organised & professional operation that use every trick in the marketing book to win the trust of bondholders and extract as much money as possible from them. This is fairly easy when you are getting 25% of the investment as fees to cover your costs and administration. If you paid your bank that sort of commission amount you could certainly expect to have a personal banker to phone at any time of the day.

Unlike banks LCF/Surge proudly highlighted their UK based agents and account managers. For some LCF investors knowing that their calls were being handled in the UK was further reassurance and a benefit compared to other companies with overseas call centres. There was no 

Customer Reviews

As well as making the most of Google advertising LCF had also realised the benefits of review sites such as Trustpilot and Feefo. Even now with 11000 customers looking to lose most of their savings LCF is still showing as 4.7/5 rating on Feefo. Some examples of reviews read:

“They were very professional from the outset and made sure that I knew exactly what I was investing in and the potential pitfalls. I have had excellent communication from them throughout the investment period and I have now reinvested due to their excellent service”

“Good account manager.”

“I found them very good when you phoned to ask anything they always sorted your query out, & always kept you informed about your bond. I always felt they had your interest at heart.”

“An excellent service from a team committed to putting the customer first.”

“Was always able to speak to a real person, who was always polite and helpful”

I very much doubt the pitfalls were explained and that they really knew exactly what they were investing in – if they had been told it was Ponzi scheme I suspect they would not have left the review. It is also possible that the review may have been added by LCF but the level of loyalty and disbelief shown by investors when the news first broke about LCF being investigated makes me think that most reviews are genuine.

The Power of Google Ads

LCF also realised the power of Google adverts and towards the end were spending huge amounts every month to promote their comparison sites to the top of searches for "Top ISA rates". These sites were run at arms length so they could distance themselves from the content but essentially were just another route to push customers into their arms.

The people behind London Capital and Finance may now be under investigation by the Serious Fraud Office and criminal charges may follow but it is clear that their scheme was very carefully thought out using many techniques to convince customers that they were a genuine company offering a secure and trustworthy home for their money.

Sadly nothing could be further from the truth but it shows how successful marketing and manipulation can be when they managed to attract nearly £250 million from savers in little over 3 years.

(c) If this is turned into a film script this is all copyright!