Could kick myself- Scottish Widows- what would you do?

RobinC_2

Just only discovered this site and what a goldmine, wish I had discovered it earlier! Okay, am a novice investor, never having really had any money in the past to invest. Saved up a good sum and just as I was having thoughts to invest it in an ISA, I was asked by the bank teller at Lloyd's if I wanted to invest; she set up an appointment for me and a week later, after having met the bank guy a couple of times, I put in a good sum into the Scottish Widows Balanced Portfolio. As SW is reputable and it seemed like a good investment with the info I was given, I didn't really think twice about going ahead with it.

After, did some research on this particular fund and soon discovered your site, and other info which suggested to me that this Scottish Widows Balanced Fund might not be the best investment around of its kind. Was surprised at what I read. Just read in the Independent, from last Sept.,that the SW Balanced Fund has been the worst performing portfolio since 2005 to put your CTF ( Govt. Child Trust Fund) money into! Eish!

Have 30 days to cancel. Not sure if I should give it a chance or not. Went back to see guy at bank who said it was a good investment and no better or worse than others of its kind and that now was a good time to invest in it, as you could buy low. He was not happy when I was thinking of cancelling, it will look bad and be a mark against him, said I should have changed my mind within the few days I was given over meeting a couple of times. I do feel bad about this.
I must cancel myself by sending in some form but am not sure if I will lose any money in administration charges, it doesn't really say much on the form, just that I could lose if the market goes down, guy at bank didn't seem to know about losing any money in admin or cancellation charges.

Now, just wondering what to do. Feel like an idiot! Already know probably what the comments will be to this but just personally wanted some feedback and assurance.

Thanks,
Robin

jem16

There is nothing wrong with Scottish Widows as an investment company - they have a lot of good funds.

Your main problem was in taking investment advice from a bank as it is usually the dearest and poorest way to invest. Their sales reps are not able to portfolio plan and just give you a choice of a few funds which supposedly match your risk profile. Your money has been put into one fund which depending on the amount involved is never a good thing.

Cancelling would see your investment lose/gain according to the market certainly but I don't think you would be liable for any charges if it's cancelled within the correct time.

You would be best investing in funds in an ISA through a Funds Supermarket. If you are able to go DIY you can do this yourself through Hargreaves & Lansdown who rebate most of th initial charge and some of the annual charge. If you feel unable to choose funds yourself you should seek the help of an IFA who can choose funds according to your risk profile.

How much have you invested? Personally I'd be inclined to cancel and then do it properly. Don't worry about the guy at the bank - worry about yourself.

You might find this thread useful.
http://forums.moneysavingexpert.com/showthread.html?t=796639&highlight=balanced+portfolio

dunstonh

As Jem says, Scottish Widows are fine. However, Lloyds Bank doesnt offer the full Scottish Widows range and their tied sales reps are not authorised to give full investment advice (as in portfolio planning). A bit like putting a learner driver in a sports car.

Went back to see guy at bank who said it was a good investment

He would say that. Its all he can sell.

I must cancel myself by sending in some form but am not sure if I will lose any money in administration charges

Charges are returned but if the value has dropped you will be liable to that (but not the charges).

I would cancel and see an IFA if you need investment advice. Even on the same product, the IFA can beat LTSB charges. If the investment is relatively large than single fund investing is poor investing. Even if its quite small then £1000 per fund to diversify is good option.

You have not been mis-sold. You just hit the limitations of being advised by a tied sales rep with a limited product range and limited remit on giving financial advice.

RobinC_2

Thanks gem and dunstonh for your replies. Yes, it was a fairly large sum- 10,000. It was invested in an S&S ISA and the rest in OIEC (I think it was called). The guy said to stay away from IFAs as they want the highest commission they can get and may invest it just according to the commission they'll get, he said SW was very reputable and the better option . That's the thing, you get things that contradict and don't know what to believe.

I will lose the ISA for this year by taking it out . But, I now feel before I rush into anything else, I want it back in my account with time to look things over. As you said, SW itself has good funds, it is this Balanced Fund though that seems to have poor performance (although the guy at the bank wouldn't hear that!)
Will send off cancellation, probably by registered post to cover my bases!

Thanks again, better to have found out now.

dunstonh

The guy said to stay away from IFAs as they want the highest commission they can get and may invest it just according to the commission they'll get

Oh dear. He spun you a story there. Commission on unit trust/OEICs (inside or outside of an ISA) are fairly generic across the board with 3% the typical average. However, funnily enough, a number of the Scottish Widows funds pay 4.5% initial commission. So, assuming an IFA was on full commission basis and did want to have a commission bias, then Scot Wid would be a good place to put the business!

So, whilst this rep was saying IFAs take higher commission, he himself was taking a commission and you were paying more in charges because of it.

You saw a tied sales rep. Their job is sales so they will tell you a lot of things to close that sale. From next year, the FSA have proposed that tied sales reps will not be able to refer to themselves as adviser or present their sales as advice as is currently the case.

On the IFA vs Tied agent comparison, here as some key points.

1 - An IFA is employed by you to act in your best interests. A tied agent is employed by the insurance company to act in their best interests.
2 - IFAs have access to whole of market and can recommend the products the tied agent has. The tied agent can only recommend their own products.
3 - IFAs can retail Scottish Widows products cheaper than LloydsTSB. They can also retail more Scottish Widows options than LloydsTSB.
4 - LloydsTSB prevent their advisers from giving portfolio investment advice and the recommendation is documented as "you chose the fund". IFAs have to recommend the investment fund(s).
5 - You can pay an IFA on fee basis where no commission is taken if you fear a bias is possible. LTSB only work on commission basis.

The one thing that an IFA can be beaten on by a tied agent is personality. There is no guarantee that an IFA would be friendlier or nicer than a tied sales rep. That is very much down to the individual rather than their licence. Some of the best IFAs I know are very technical but quite poor in a sales presentation. They can bore your socks off but I would take that over a sales rep.

Dont let it put you off investing. If you want to invest, you should. You now know that you can do better though.

jem16

RobinC wrote: »

Thanks gem and dunstonh for your replies. Yes, it was a fairly large sum- 10,000. It was invested in an S&S ISA and the rest in OIEC (I think it was called). The guy said to stay away from IFAs as they want the highest commission they can get and may invest it just according to the commission they'll get, he said SW was very reputable and the better option . That's the thing, you get things that contradict and don't know what to believe.

As Dunstonh has said the guy spun you a load of bull!

Average commission taken by IFAs is 1.8% - I paid 1%. Your Lloyds sales rep made at least 3% if not more. That's why he's unhappy at you wanting to cancel.

I will lose the ISA for this year by taking it out .

As far as I'm aware if you cancel within the cooling off period you are taken back to the same point that you were at should you never have taken out the investment. In other words you do not lose your ISA allowance so you should be able to start again - perhaps Dunstonh can confirm?

dunstonh

cancellation during the cancellation rights kills the ISA before its registered. Your ISA allowance is still available to use.

RobinC_2

Thanks again. The guy said that he did not make any commissions but was only paid a straight salary; however, if I cancel it will go against him, a black mark so to speak because a client cancelled. Do you think that's correct? As you say, which I didn't really realise before, he is basicall a sales rep for SW.
He did say that I would lose my ISA if I cancelled and put it back in my bank account, so good to hear that that should not be the case. Also said I shouldn't listen to what people say on the Internet and make a decision based on that!
As I said, I am thankful I found this board. Will proceed forward!

Aegis

Sounds like he's telling you any number of falsehoods to keep your business...

Personally after all the dubious information he seems to have given you, I'd be walking away even if I wasn't going to an IFA next! I don't ever want someone who will happily lie to me looking after my money, and from what has been said here it sounds like he's been caught in at least 3.

jem16

RobinC wrote: »

Thanks again. The guy said that he did not make any commissions but was only paid a straight salary;

Perhaps he personally doesn't but the bank certainly does and it's they who employ him.

however, if I cancel it will go against him, a black mark so to speak because a client cancelled. Do you think that's correct?

I doubt it but even if it does this guy deserves it for all the lies he has told.

He did say that I would lose my ISA if I cancelled and put it back in my bank account, so good to hear that that should not be the case.

If he really nelieves that it shows you the level of his knowledge. Just make sure you go through the correct cancellation procedure with SW and not just simply take your money out.

Also said I shouldn't listen to what people say on the Internet and make a decision based on that!

That's the first sensible thing he's said so far!

I wouldn't listen to what any old person on the internet is saying. However you can be quite sure that if Dunstonh says you would be better cancelling and seeing an IFA then you definitely would be.

As I said, I am thankful I found this board. Will proceed forward!

Don't let it put you off investing. Just make sure you see an IFA.

dunstonh

The guy said that he did not make any commissions but was only paid a straight salary

I used to work for Lloyds as a tied agent (albeit many years ago). Most IFAs start as tied agents, its the natural career path nowadays. The pay method is not commission but a salary based on the commission you earn. The more commission you earn, the higher the salary. The lower the commission, the lower the salary. So, technically its not commission but its a word play as the income is dependent on the business written. Most of the salesforces work to a similar basis. Bonuses based on business written or needing to write £100k of commission to be paid £30k salary (or lose your job or face paycut) could all be classed as salary but the targets are commission based. It just allows them to say they are not commission based as a sales tool.

if I cancel it will go against him, a black mark so to speak because a client cancelled. Do you think that's correct?

Cancellations are a monitored KPI (key performance indicator). It is monitored to see if you get too many cancellations. If you do, it indicates that you are possibly using a hard sell and people are signing up and cancelling afterwards or you are not presenting your recommendations adequately. You would need a lot of these for it to be held against you. That said, he would have disclosed his sale to you to his sales manager and cancellation will create a clawback and he will have to sell more to others to make up for it.

He did say that I would lose my ISA if I cancelled and put it back in my bank account, so good to hear that that should not be the case.

You dont have to worry about that but it gives you an indication of the type of person you have dealt with. Either low skilled or deceiptful. As long as you cancel during the cancellation period using the cancellation rights then it voids the policy as if it never existed.

Also said I shouldn't listen to what people say on the Internet and make a decision based on that!

There is some merit in that. However, in the case of generic information like this, it's a good resource.

Working as a sales rep is a pressure environment. You have sales targets, you have a sales manager breathing down your neck. Your job depends on getting results above target otherwise you are dismissed. That is not an environment to get proper financial advice. Sales reps are taught sales techniques and how to say things like not being paid commission and how IFAs are and that the products the rep offers are the best etc. and spin information to their advantage.