Bank advised my dad to put all redundancy into shares, bad advice?

jack_spratt_2

Time and time again we get posts from people who are investing outside there risk profile !!!they clearly do not understand the type of investment they have taken out.

dunstonh

That would be my gripe. Who decides what is medium risk though. In my opinion if someone came into a bank with 50k redundancy and said my attitude to risk was medium, i'd say 15k cash, 10k fixed interest investment and 25k in shares like a UK managed fund. Would you agree (obviously these are ball park figures)

The risk profiles are fairly generic across the board. Some work on different scales (1-5 or 1-10 etc) but the positioning should be similar.

The problem is that tied agents are not authorised to portfolio plan. If someone says medium risk for £50k then they will put £50k in medium risk. That is not a mis-sale. IFAs portfolio plan as can some multi-tied.

That said, you would expect a good enough cash reserve left over after investment. Especially as he was made redundant (although if he found another job, then the size would reflect that).

How is your father invested at the moment? How big was the cash reserve?

Perhaps your father could try getting hold of the documents which they hold on the advice-giving situation. He could ask for this under data protection legislation, couldn't he?

He doesnt need to quote data protection. Client file data and reports are available on request.

greenface

jack_spratt wrote: »

Time and time again we get posts from people who are investing outside there risk profile !!!they clearly do not understand the type of investment they have taken out.

and whats your point

advice and opinion isnt that what we are all doing here.

I am learning quickly and have little idea of my risk profile i will learn more and have more idea.
This persons dad has recieved a redundancy possibly the most money he has had at any one given time. Financal planning may not have been his strong point he could have been a welder. Asking yourself where to go to talk to if you have lots of money and little knowledge on where to best put it THE BANK seems logical and better than the pub or the dogs.
Dont forget that we are told by professionals what our risk profiles are. If the persons dad would have trebled their money i dont think he would be here seeking advice.
All other advice to this poster is good constructive information
good luck with your dad

jack_spratt_2

greenface wrote: »

and whats your point

advice and opinion isnt that what we are all doing here.

I am learning quickly and have little idea of my risk profile i will learn more and have more idea.
This persons dad has recieved a redundancy possibly the most money he has had at any one given time. Financal planning may not have been his strong point he could have been a welder. Asking yourself where to go to talk to if you have lots of money and little knowledge on where to best put it THE BANK seems logical and better than the pub or the dogs.
Dont forget that we are told by professionals what our risk profiles are. If the persons dad would have trebled their money i dont think he would be here seeking advice.
All other advice to this poster is good constructive information
good luck with your dad

Sorry I should have made it a bit clearer this is in no way aimed at the posters father !! more at the advisor for not fully explaining the risks involved with the investment and accessing his attitude towards the risk
I guess the posters dad is probably of the old school!! if the financial advice comes from a bank it must be good idea

paul5046

LongTermLurker wrote: »

The most obvious thing that springs to mind is that it happened when he was made redundant. The important things that would determine whether it was a reasonable choice would be things such as whether he had another job lined up, whether he had ongoing debts such as a mortgage, whether he had sufficient savings/income to act as a buffer until his income returned etc, along with his stated timescales and attitude to risk.

He was made redundant and retired due to ill health. I need to see the documents to see the exact circumstances of the advice given. Should they have given him a copy, dont all advisors have to fill in a fact find.

Money_Grabber13579

Would a bank really have been so foolish as to tell a retired man to put all his savings into shares??? Would it not be more likely that they gave various options of investment profiles, of which he choose the shares? Although, I would have thought the bank would have advised strongly against putting that kind of money into shares at his age.

Unless he put them into bank shares? Must have known they needed to raise capital...

EdInvestor

dunstonh wrote: »

You cannot complain because the value of an investment goes down. The only potential to complain about is if the risk profile of the product and investment doesnt match the customer/client. You have not mentioned the product, funds or risk profile of your father. Until you do then there is nothing to really comment on.

Quite so.

For info, a cautious risk profile would normally have a max of 60% in shares, a balanced profile 75%, with the rest in low risk assets like cash and bonds.There is some flexibility with property funds which were regarded as low risk until quite recently.

There is a lot of confusion between low risk and no risk.A low risk profile might have as much as 30-40% in shares and property, while no risk should be in cash only.

sabretoothtigger

Standard advice is not to invest anything into shares you need in 5 or 10 years so holding a pension in shares at age 50+ is risky

paul5046

Money_Grabber13579 wrote: »

Would a bank really have been so foolish as to tell a retired man to put all his savings into shares??? Would it not be more likely that they gave various options of investment profiles, of which he choose the shares? Although, I would have thought the bank would have advised strongly against putting that kind of money into shares at his age.

Unless he put them into bank shares? Must have known they needed to raise capital...

When i asked him he said he just did what they told him to do.

Tighthead

The key points to look out for;

- did the adviser allow sufficient emergency/contingency funding? This then determines the amount available to invest
- what did your Dad say that he want to invest for, for how long and whether he needed an income or access
- what did your Dad discuss in relation to his attitude towards risk? It isn't good enough simply to say "I did what I was told to do". The FSA/FOS take the view that as an adult, entering into an agreement with potentially your life savings, you ought to be pretty clear on what you want.

Ultimately, it's up to your Dad to decide his attitude to risk (ATR), not the advisor. The advisor's job is to match up the product/fund with your Dad's ATR.

As dunstonh has already said, I very much doubt that the bank recommended an investment in shares, more likely an equity fund in a bond. Your Dad will have been given an illustration, product guide and some sort of letter or report justifying what the advisor sold. He needs to check these to see if they correlate with his recollections and expectations. If he firmly believes that the risk is different (i.e. higher) to what he stated/discussed, then he should direct a complaint to the Compliance Officer at the Bank. If it's as he remembers, I'm afraid there is little that he can do. You can't bring about a complaint just because the funds went down, but in other respects it was the right recommendation.

If your Dad doesn't have copies of the documents given to him (I sincerely hope he's kept them), then he is entitled to get further copies. I doubt that the fact-find will have been made available - that, you will have to make a Subject Access request for under the Data Protection Act. This will record the discussion around ATR.

Incidentally, anyone can make a complaint to the FOS on someone else's behalf, so you could instigate the complaint for your Dad. The bank/FOS would be obliged to investigate but they will probably reply to your Dad unless you get him to sign a letter of authority instructing you to act on his behalf.

Good luck.