AVIVA's MVR ate my profit

Rollinghome · 15 April 2011 at 3:42PM

dunstonh wrote: »

You stalk these forums just to post the opposite opinion to whatever I post and try and slag off advisers at every chance going even when the thread has nothing to do with it. just like this one.

Strange though it may seem to you Dunston, it is permissable to post views that differ from yours about the products you may have sold. It was you who initially quoted and questioned my post, not the other way around.

There are certainly decent advisers around who don't mislead or defend the indefensible. Such as Peter McGahan on the ThisIsMoney forums and Justin Modray at www.candidmoney.com. Unfortunately there is also a high proportion of ex-salesmen of various kinds now working as advisers and more than a few rogues too. As I remember you prefer not to discuss what you did before becoming an IFA.

This is what Peter McGahan said of with-profit bonds last week:
"With profit bonds. Now there is the world’s greatest enigma. Not only were they never a good idea, but it is now over ten years since they were really shown to never be a good idea. Yet, today there is over £330bn sitting in such arrangements, fermenting at the expense of the unaware investor." Full post at http://boards.thisismoney.co.uk/tim/threadnonInd.jsp?forum=113&thread=113370&message=607894

Another post by Peter about investment bonds yesterday, "7 things you don’t know about investment bonds but should": http://boards.thisismoney.co.uk/tim/threadnonInd.jsp?forum=113&thread=113540&message=610587

The FSA have frequently expressed concerns about w-p bonds http://www.ft.com/cms/s/2/63515b96-85fc-11df-bc22-00144feabdc0.html#axzz1JbMgReKb

It's a pity these forums and users don't have the benefit of an IFA as objective as Peter McGahan and Justin Modray. I wish they did.

jhxmt · 15 April 2011 at 4:04PM

Personally I've always found dunstonh's posts to be very informative and useful. As with any personal opinion (as all posts on these forums are), they necessarily reflect his viewpoint, but (a) that doesn't invalidate them at all and (b) I think it's the height of bad grace to effectively open up an unprovoked, ad hominem attack against someone who is trying to help people on these forums, in their free time. Disagreement is all well and good, but as soon as you start insinuating that the author has an ulterior motive and attack on that basis rather than on the content, the rest of your post loses credibility.

On the original topic: OP, there's probably little you can do at this stage, but this is presumably the right time to step back and take stock of whether or not this and similar products are right for you in future - particularly now you've got a heightened awareness of some of the potential downsides.

dunstonh · 15 April 2011 at 4:41PM

Strange though it may seem to you Dunston, it is permissable to post views that differ from yours about the products you may have sold. It was you who initially quoted and questioned my post, not the other way around.

It is not about different views. Its about you totally ignoring the thread subject and turning it into an anti adviser rant and taking the thread off subject.

You cant seem to make your mind up what you are talking about on this thread. Most of it has absolutely nothing to do with the subject. That is not fair on ellenGB who posted about a particular fund.

As I remember you prefer not to discuss what you did before becoming an IFA.

I have no problems at all with my career history. I just don't see what point my career history has to do with anyone on an internet board. Only you seem to have this perverse infatuation with it.

When you leave school and start your career I am sure you will then realise that you dont start at the top and that you work your way up.

magpiecottage · 15 April 2011 at 10:26PM

property.advert wrote: »

Then this raises the transparency and legitimacy of any valuation where it cannot be liquidated for the quoted amount.

If one has 100 shares in a fund which is quoted as being worth £10 a share then, then the investor should have reasonable confidence that it will in fact be worth £1000 and not merely £900. Otherwise the £10 a share valuation is misleading at best.

But shares do not carry the guarantee of inflation proofing which the OP says (s)he had.

If you want insurance then somewhere along the line an actuary is going to factor in a price for that and, unless you are an extraordinary mathematician, you are going to have to take their word for it. That is not actually such an unusual concept - I have been in aeroplanes but have only a vague idea how to drive the things!

property.advert wrote: »

Remember, we are never talking about liquidating a £XXX million fund all at once and as people withdraw, then others invest, meaning that for many holdings, there is no bid offer spread to cross.

I think this indicates that you do not understand how these products work. If an investor was able to sell his investment for £10 and immediately buy it back for £9 then his gain of £1 represents a loss of £1 spread between all the other investors.

That is why the guarantee only operates in specified circumstances and/or on specified occasions.

You can have certain guarantees or total transparency - but it is unrealistic to expect both.

jem16 · 16 April 2011 at 10:49AM

ellenGB wrote: »

It's not so clear why it is being applied in the with-profits bond after five years, where the leaflet on the fund claims that it has done well, and when the company is doing well.

With-profits investments are designed to grow steadily in value rather than being subject to the normal ups and downs. As you say 5 years I'm assuming you took your bond out in early 2006. In 2006 and 2007 the stock market did increase but in 2008 and early 2009 there were large drops. Halfway through 2009 and 2010 saw good growth. If the MVR is still being applied it's because that growth hasn't been quite enough yet to see its removal as the valuation on your statement is higher than its true valuation.

It's quite well explained here on the graph on Page 7;

http://www.aviva.co.uk/adviser/product-literature/view-document.cgi?f=in50005c.pdf

We're not in the double-dip (yet), so in my view, it's reasonable to have invested in and paid for the guarantee of inflation-proofing and a reasonable MVR. Reasonable in my books does not mean all the gains (profits) after five years.

These investments are really designed to be for a period of 5 to 10 years. You are at the lowest point on that. If the drop had happened in years 1 and 2 rather than 3 and 4 it might have been a different story.

Perhaps you could give the figures in percentages rather than amounts? To talk about a gain of £1000 is relative to how much you actually invested.

I don't mind investment funds except that in this case, I'm bothered by the ethics of the company. I've had an issue with them before and the Ombudsman agreed with me. The customer is king. If you don't like something, don't buy it and if you did, complain and see what an independent person says. Thank you for the constructive advice and empathy. The moral of the story is that in practice, these funds have definite downsides. MVRs are fine if not excessive. Everything in moderation.

You are basically paying for the guarantee though - that is the upside. The downside is the MVR.

Why did you choose that particular fund as opposed to non with-profits funds? Why did you choose Aviva itself?

To be fair to Aviva they do have a lot of literature freely available on the website which does contain a lot of info on this bond. I have the same portfolio bond but not in with-profits funds. After 5 years it has made a gain of around 31%.

I don't even recall the MVR being pointed out to me but it's in the book. It doesn't note how long, or even how much.

Some have a no MVR guarantee after 10 years. Perhaps you should ask Aviva?

I took £600 out as a withdrawal in the first year, and the book suggests that had I continued to take money out, MVR would not be applied.

It says an MVR wuld not be applied for withdrawals of up to 5%.

dunstonh · 16 April 2011 at 12:18PM

Reasonable in my books does not mean all the gains (profits) after five years.

The problem is that you think there are gains but there are not. The underlying fund has not performed at the same level as your running value. Hence the MVR. When its above trend, they add a final bonus, when its below, the have the MVR.

Most of these Aviva plans had MVR free exit points at 5 or 10 years. If you have a 10 year MVR free exit point and with the inflation proof guarantee, then keeping it until that point may make sense.

The moral of the story is that in practice, these funds have definite downsides.

It is very much a niche fund. Its not a bad option for someone who is looking for capital security and investing very long term or even until death (basically points when an MVR wont exist). However, for people looking for more conventional investment options, most wouldn't go near a fund like this nowadays. The cost of the guarantee and the smoothing effect prevents it working like a conventional unit linked investment.

jem16 · 16 April 2011 at 3:27PM

ellenGB wrote: »

I invested £15000 on the advice of my financial advisor.

A tied adviser from a bank or an IFA?

Presumably though you asked for your capital to be protected. Why aren't you having these discussions with your FA who would have all of the information on why this was recommended in the first place?

jem16 · 16 April 2011 at 3:44PM

ellenGB wrote: »

IFA and still have him as advisor, who is surprised and has no answers either.

I think that would concern me more that your adviser doesn't have any answers.

opinions4u · 16 April 2011 at 3:52PM

ellenGB wrote: »

IFA and still have him as advisor, who is surprised and has no answers either. Please don't assume that I've come here without having done some homework first.

It was a fairly important question.

Ask him to explain how he justified the sale if he's "surprised" at the MVR.

opinions4u · 16 April 2011 at 4:52PM

Ok, don't bother then.

You're right - the IFA can only base a recommendation on information available to him at the time. But if he's "surprised" at what's going on it sounds like he didn't understand what he was selling.

Hold him to account.

AVIVA's MVR ate my profit

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