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Investing in whisky is an increasingly popular choice with savvy investors who are looking to diversify their investment portfolios. The appeal of investing in something tangible, sought after, and that you are passionate about is obvious, and it’s this strong appeal that unfortunately has also led to an increase in the number of whisky investment scams. With this in mind, knowing how to verify the legitimacy of any whisky investment you make has never been more important.
Avoid promises of quick returns
Ask a trusted expert in the industry, and they will tell you that whisky investments are far from get-rich-quick schemes. “The market really works on long-term holds. You really wanna be thinking 10 years or longer,” says Alphie Valentine, Co-founder of Hackstons, the whisky specialists who provide opportunities for investment and consumption, while focusing on improving trust and transparency in the industry. It’s natural to be attracted to promises of quick returns, perhaps even ‘guaranteed’ returns, but these types of offers are fundamentally incompatible with the whisky market. The value in whisky is built gradually over time as it ages, matures, and generally becomes rarer.
Look for renowned distilleries
If you receive an unsolicited approach touting whisky from a distillery you have never heard of, you should be prepared to ask more questions. Not all whiskies are created equal, and some distilleries are more desirable than others when it comes to their casks. Even then, the size of the return is never guaranteed. Getting the basics right by making sure that the distillery is both highly regarded in the industry and has a track record of creating value is crucial here.
Ask detailed questions
Any company offering you the chance to invest in whisky needs to be an expert in the field if you’re going to be able to achieve any sort of meaningful return. This is because, although whisky generally increases in value when left to age for long enough, it has to be handled extremely carefully for many years. Checking key details such as the type of cask and the typical years of maturation is essential here. If you find that these basic pieces of information are not forthcoming, this is a sign that you are dealing with someone who doesn’t properly understand the industry. This is a warning sign because if whisky is not handled correctly, it can quickly become worthless.
Put a name to a face
Knowing who you are investing your money with is essential because it will allow you to really dig into the details. A public profile that is readily accessible, such as Hackstons on Instagram, needs to do more than simply market and advertise an opportunity. It should show you that everything is fully transparent and that any answers or updates you need will be provided quickly and efficiently. It’s also a chance to look for social proof by connecting with other investors from the community. You can hear what they like and don’t like about their investments, the level of customer service they have received, and how they have found the overall experience. Going further and arranging a face-to-face meeting is something many investors choose to do. Any creditable whisky specialist will be more than happy to do this, but anyone who tries to talk their way out of doing so should immediately be red-flagged.
Focus on the regulations
One of the reasons cask whisky is an increasingly popular investment is that it is exempt from Capital Gains Tax for as long as it is maturing in the barrel, but there is a caveat on this exemption. The warehouse or specialist storage facility will need to be fully bonded and approved by HMRC to qualify, and when the whisky is bottled, it will be subject to Duty, VAT, and potentially CGT. The company offering the chance to invest should also hold AWRS or WOWGR licenses. Asking for proof in writing of each of these key things will provide peace of mind and help you ascertain whether or not the investment opportunity is legitimate.
Confirm provenance
Confirming provenance means that you have the full backstory of the cask you are investing in. You want to know when and where it was distilled, how it has been stored, where it has been stored, and who, if anyone, owned it along the way. For high-value assets, confirming provenance is essential. Simple things like being able to confirm in writing that the casks have been held in a climate-controlled environment will help them hold their value. The same is true if you can also confirm that they are being regauged when necessary, to check that the ABV (Alcohol by Volume) doesn’t fall below the 40% threshold needed to be legally classified as Scotch whisky.
Verification is a process that works best when you take your time to get all of the fine details right. The urge to invest in something you are passionate about is natural, but without due diligence, it can reduce your chances of success. Stepping back and surveying an offer from a trusted whisky specialist such as Hackstons, will help you to diversify your portfolio the right way. Doing so will also protect you against potentially unscrupulous practices and schemes.
