Legal & General Distribution (Growth) Fund

oliveoil54

Hi
Any advice would be welcome.
My Mother-in-Law - 3 years ago invested most of her life savings in a 5 year Legal & General Distribution (Growth) Fund (against my advice as she def didnt know what she was investing in and the capital wasn't guaranteed!). Obviously for first 2 years the returns/interest was good at nearly £10,000.

However her most recent statement shows that all that has now gone along with over £2000 of her capital. Given the current financial situation she is panicking that she might loose more or even the lot. She wants to withdraw the balance now to make sure she doesn't loose anymore, and has finaly decided to take my advice - but I am concerned as to what the correct advice should be - not having a crystal ball.

My gut instinct is to leave the investment alone in the hope that the market will climb back up and she wont incur further unnecessary penalty charges when she cashes in on maturity or a bit later. Hopefully the market 'cant' ? drop any further and if she lives a further 2 to 5 years, I think she may at least get her capital back and poss a smaller return than she originally was advised, but that would be better than realising a loss now.

I would appreciate any advice regarding this as I really am not sure whether this is the correct way to go, and as it is such a large sum to her I would feel incredibly guilty if she did as I said and the market bottomed and she lost a lot more money. I would like to be able to show her all the replies to this post - which by giving a more educated spread of opinion, will I hope help her to make her mind up.

She is 78 and her health is not too good. In my opinion the Financial Advisers did not enforce enough - the fact that she could loose capital in a market fall. I had another elderley Aunt who also invested quite a large sum in a similar product from advice given by her local Barclay's IFA but fortunately she took my advice and got out before the market fell and put her savings in a much safer place.

I know IFA's are supposed to ensure clients are aware that their capital may not be safe depending on the investment - but strongly feel that especially with elderley clients who really have no idea what they are investing in - they are more interested in getting the investment and resultant commission, instead of giving them totally safe investments!

Any advice welcome
regards
Pat

dunstonh

Given the current financial situation she is panicking that she might loose more or even the lot.

She will never lose the lot. Well technically its possible but she wouldnt be worrying about money if that was the case.

She wants to withdraw the balance now to make sure she doesn't loose anymore

So, she waits until a bad period (which is always going to happen - typically on average of once every 7 years) and then wants to take her money out and crystallise what is just a paper loss and not wait for the recovery to happen?

My gut instinct is to leave the investment alone in the hope that the market will climb back up and she wont incur further uncessary penalty charges when she cashes in on maturity or a bit later.

That would be the correct instinct. When you invest, you take the rough with the smooth. You get good years and bad. You average those out and dont worry during the bad.

Hopefully the market 'cant' ? drop any further

She is not fully in the stockmarket so she hasnt had the full effects of the market drops. However, the market is over 20% up on its lowest recent point. It could go down again but we could be past the worst.

In my opinion the Financial Advisers did not enforce enough - the fact that she could loose capital in a market fall.

Well you appeared to know about it. There are plenty of warnings on the illustration, key features and suitability report.

I had another elderley Aunt who also invested quite a large sum in a similar product from advice given by her local Barclay's IFA

Barclays were tied to L&G and were not IFAs. They do now have a whole of market arm but its run under as salesforce.

I know IFA's are supposed to ensure clients are aware that their capital may not be safe depending on the investment - but strongly feel that especially with elderley clients who really have no idea what they are investing in - they are more interested in getting the investment and resultant commission, instead of giving them totally safe investments!

Or to read that another way. You were happy when it was making more but are not now it isnt and despite knowing there were risks you dont want to accept the downsides that come with taking a risk?

Investments are for the long term. They zig zag in value. Some years you get big returns, some years you get nothing. Some years you get large losses. This is why you dont invest for just 2 or 3 years. Your MIL is only three years in. I'm no friend of the salesforces and think they should be banned or have the adviser tag removed and have it made clear they are sellers rather than advisers. However, in this case there doesnt seem to be anything wrong other than wanting to all the benefits of the good years with none of the bad.

oliveoil54

Thanks very much for such a quick reply.

Its good to know the market seems to be back on the up.

As far as initial investment - she had a few bonds coming to maturity 3 years ago - I told her not to invest in anything she didnt understand and that didn't guarantee her original capital.

She chose the L&G from the advice of her IFA - an ex-Pearl Salesman, she only told me about it weeks after she'd bought it!

Yes I agree the IFA had def followed all the required advice rules - but even to me an apsolute amateur, it was obvious she had no real idea what she was purchasing and was just going on the 'illustrated' possible growth guide.

Thanks once again - will def show her your comments.

£$&*"($£&(

And if you cashed it in there is probably a charge of 5% to pay in the third year. My parents have an LG Distribution Bond (not this version but similar) as well which is in its third year. You can keep an eye on things here, it's just over half way down:

http://www.legalandgeneral.com/investment/portfolio_bond.jsp

Rebecca19

I am new to investments and have recently taken redundancy and voluntary early retirement. I have a significant capital sum to invest and am being advised albeit by a L&G Advisor to put the majority 80% into the legal and General Distribution Fund for 5 years. I need to generate a monthly income of around £300 to meet a shortfall in income until I get employment. I have identified a smaller amount (20%) to put into a similar fund for 12 months.

I have been made fully aware of the risks of this investment - which are described as cautious - but am wary about putting so much into one fund.

Should I be looking at other options or does the Legal and general Distribution Fund represent a reasonable option.

dunstonh

but am wary about putting so much into one fund.

And so you should, unless you want a basic investment and dont really care about the money.

Should I be looking at other options or does the Legal and general Distribution Fund represent a reasonable option.

As you seeing a tied sales rep of L&G you will be working on full commission basis. So, keeping it like for like, the L&G option isnt bad. Its not the cheapest and the L&G tied reps dont actually get the best L&G bond. That is only available via IFAs.

One also assumes the sales rep has told you to fully utilise your ISA allowance? (tax free vs tax paid)
Also, have they done a cost and tax analysis vs unit trusts? (important where fixed interest securities will make up part of the portfolio and of course it needs to be done to get best advice)
The L&G sales rep wont be able to portfolio plan so you dont expect that. However, what level of servicing are you going to get (e.g. annual review with bed & ISA to use your allowances etc)?