Inexperienced saver - advice please

maggiesoup

Hi all
I realise that the markets are at an all time low but a few years ago I gave about 75% of my savings to a financial advice company (well respected and recommended by my lawyers) however since then I've only been contacted by them 3 times (2 personal meetings & one letter) and since March this year not a word. They give my portfolio to a company called Transact and noticed that my stocks & shares have fallen by about 20% overall (14 out of 15 investments having gone down).

Am I asking too much that I expect them to at least have contacted me in the last 10 months with an update or a phone call and should I have expected such a drop, with 90% of my investments having taken a downward fall?

I have no interest or knowledge about the financial market and that's the reason I went to a financial institution in the first place but I'm becoming very disappointed by the whole thing especially when they get their money when markets are good or bad it seems.

Comments would be grateful. Thanks.

earlgrey_3

Hi Maggie, it would depend on exactly when you invested to get an idea of how your investments have compared. For example many financial advisers have been persuading clients to invest throughout this year dispite the huge downside risks and some will have lost 40% of their investment as a result. When any part of their fee is from commission there's an incentive for them to do so. Better advised investors would have been moving into cash. Also important is exactly what your instructions were and the details of the arrangement. As you say, they get their profit regardless of whether you gain or lose.

Blah99

I have no interest or knowledge about the financial market and that's the reason I went to a financial institution in the first place but I'm becoming very disappointed by the whole thing especially when they get their money when markets are good or bad it seems.

This sentence highlights the problem. Think about what you're saying here. You have no interest in how your hard-earned money is managed, but you're unhappy when you find that the value of your investments have dropped. The absolute best thing you can do is to get interested. Take some time to teach yourself basic investment techniques and you will be in a much better position to understand what's happening.

From the short description you've given it sounds like Transact have done nothing wrong. But then it depends on what you told them your risk profile was, how you wanted to invest etc etc. Perhaps if you give a better explanation of all this, plus a list of your investments, people can comment further. That said a 20% drop is actually not bad performance for investments managed in the way yours appear to be.

maggiesoup

Thanks for comments, although Blah 99 seems to be giving me a stern ticking off. Yes, of course I want my hard earned money to be invested wisely and that is precisely why I gave it to the "experts" as I simply cannot understand the ups & downs of the stockmarket. Their remit was just to invest it in safe/lowish risk. I guess my biggest complaint is the fact that I haven't heard a peep out of the them, good or bad, but they are still happy to take their cut for doing what seems like nothing.

Blah99

maggiesoup wrote: »

Thanks for comments, although Blah 99 seems to be giving me a stern ticking off. Yes, of course I want my hard earned money to be invested wisely and that is precisely why I gave it to the "experts" as I simply cannot understand the ups & downs of the stockmarket. Their remit was just to invest it in safe/lowish risk. I guess my biggest complaint is the fact that I haven't heard a peep out of the them, good or bad, but they are still happy to take their cut for doing what seems like nothing.

I hate to tell you this, but IFAs are not really "experts" in much. Certainly some of them are very good at their job but the vast majority do not have some special talent or knowledge that's beyond the ken of us mere mortals outside of the financial sector. They simply use their opinion to recommend risk levels and investment options to you, but at the end of the day that's all it is - an opinion. Please don't believe for a second that by using an IFA you're gaining some "special favour/advantage" (or however you want to term it).

The reason you won't have heard from them is that they don't have any need to contact you. You gave them a chunk of money and said "I'm a medium to low risk person, do something with this please", they took it, sliced off some commission then invested your money in some funds (or whatever). The investments they chose have declined in line with the wider financial situation, and actually a 20% drop is not a bad loss at all for the last year. Look at it this way - if your investment had gone up by 20%, would you have expected a call from them?

Basically you're looking for the same kind of service that all investment novices look for when talking to an IFA. You want to give your money to the IFA and you want them to watch it day in, day out, updating you on your losses and gains outside of a certain percentage threshold. You also want them to swap your money in and out investments as the market moves to maximise your returns and minimize your losses.

The bad news is that an IFA will not do that unless you're a multimillionaire with a dedicated portfolio manager. All an IFA will do is have a couple of conversations with you to understand your risk attitude, then pick some funds (or whatever) to invest in. You'll give them your £20k (or whatever), and they'll slice it up as they feel is appropriate - £1k into a property fund, £2k into emerging markets fund, £5k into a growth fund etc etc etc (again, all just examples). Once they've put the money into the funds they'll pocket their commission and move on to one of their other thousand clients. Meanwhile your money sits in the funds, moving up and down along with the market, and giving the fund managers a nice commission also. That's it. You get nothing more.

Hopefully now you see why an IFA is quite often a total waste of time. The best thing you can do is to do a bit of reading on how the stock market works. Then go to a site like HL or Interactive Investor and use their fund picker. For example:

http://www.iii.co.uk/funds/

The III fund site offers you a selection of ready-picked funds, or lets you pick your own funds through a fund filter tool. All it does is ask you some easy questions, which (shock horror) are quite similar to the ones your IFA will have asked you.

You say you cannot understand the ups and downs of the stock market, but I bet you can. I assume you watch the news, right? So let's look at what you know from the news:

1. We've got serious problems in the property market. House prices are dropping like a stone.
2. We've got serious problems in the banking sector.
3. The Government are talking about measures to increase consumer confidence and get people spending money again (VAT reduction etc)
4. Price of petrol has come down a hell of a lot

So we can draw some pretty simple conclusions from this. Number 1 means we really, really should stay away from any funds or shares that are related to property. That means REITs are out, and companies like Persimmon, Barrat etc should be avoided like the plague.

Number 2 is self-explanatory. Do you really want to invest money in the banking sector when they're being bailed out by the Government and some Saudis? Feels like a bad idea to me.

Number 3 is an interesting one. I wonder why the Government want to do this, maybe because it's a way to kick start the economy? So if VAT drops, what impact is that going to have on companies? Probably increase sales in some sectors, especially around Christmas.

Number 4 is another interesting one. Petrol cost us a fortune not long ago, and it's all the way under 90p a litre now. I wonder what that means, especially for companies like Shell and BP? And I wonder why the price of oil dropped...

Just some things for you to think about. Start finding the answers to some of these questions and you'll realise just how much you can understand about the stock market by simply watching BBC News....

thor

maggiesoup wrote: »

Thanks for comments, although Blah 99 seems to be giving me a stern ticking off. Yes, of course I want my hard earned money to be invested wisely and that is precisely why I gave it to the "experts" as I simply cannot understand the ups & downs of the stockmarket. Their remit was just to invest it in safe/lowish risk. I guess my biggest complaint is the fact that I haven't heard a peep out of the them, good or bad, but they are still happy to take their cut for doing what seems like nothing.

The problem with these 'experts' is that they can't promise which way your investment will go. They may know more than you but I bet nearly all will be down now when compared to last year (or even 10 years ago).
Also don't fall for the 'investing in stocks and shares is for the long term'. There is no reason for equities to return to previous high values within 2 , 3 or even more decades. It is just a socially acceptable form of gambling.

paul5046

Hi Maggie, i wouldbe tempted to speak to your lawyers who recommended them and ask their advice.

arcadia00

Would this be a common scenario, whereby a greenhorn walks in and has a bet with three quarters of their capital.

maggiesoup

Well, well, well. I should have just listened to my dear old dad. He had very little, but what he did have he put in a high interest bank account and left it there. I wished I had listened to him. This is the second time I've been let down by this group of piranhas, I was niavely swung by the recommendations of my law firm. All your comments have just confirmed that Financial Advisors are just in it for the money..... as I keep saying, just one letter explaining the current situation would have been enough, but absolutely nothing in 8 months is just a disgrace. I know its a rubbish time to do it, but I'm sorely tempted to withdraw all the funds and just stick them all in a high interest bank account. If nothing, it'll stop them getting any more commission, which will please me immensely.

unhealthyman

maggiesoup wrote: »

Well, well, well. I should have just listened to my dear old dad. He had very little, but what he did have he put in a high interest bank account and left it there. I wished I had listened to him. This is the second time I've been let down by this group of piranhas, I was niavely swung by the recommendations of my law firm. All your comments have just confirmed that Financial Advisors are just in it for the money..... as I keep saying, just one letter explaining the current situation would have been enough, but absolutely nothing in 8 months is just a disgrace. I know its a rubbish time to do it, but I'm sorely tempted to withdraw all the funds and just stick them all in a high interest bank account. If nothing, it'll stop them getting any more commission, which will please me immensely.

Pffft. Of course financial advisors are in it for the money. It's their job. They also do better if your investments do well - they aren't trying to get one over on you. They are also pretty much pitched at people as (dis)interested in financial matters as you. You gave them your money and they invested it.

Did you ask/inquire about how often you would get valuations or information? I'm guessing not.

Did they mis-manage any of your investments? I have no idea. Probably not.

Have your investments been hurt by global economic turmoil? Yes... As has pretty much every other investor.

If you aren't prepared to take losses, then you shouldn't be investing. Someone should have informed you of that before you put your money into investments. That was your mistake. It can be galling to lose money when the markets go bad. But you don't really have anyone to blame. (Except perhaps yourself.) It is a chance you take when you invest.

If you withdraw all your money at a loss just to spite them, they will carry on doing their job regardless, while you will feel smug but poorer. If you are going to make such important financial decisions emotionally and on a whim, then you definitely shouldn't be investing your money in stock markets etc. (Don't get me wrong - withdrawing might be a smart move, but make it for the right reasons.)

Lokolo

Although I do slightly agree with Blah there are some points to make. Those are only 2 sectors out of a lot, fair enough, really you won't know what is going to happen in the future.

I went for Global Growth since September, and have made a 30% loss, now I wasn't really expecting a gain at the current time. But thing is, I don't know if I am making good choices or bad choises. Same as if I was buying a car, now, I don't know anything about cars (other than the usual stuff you learn as you drive), so when I plan to buy a new car I will go to my mate who knows his shizzle.

This is what I would rather do with my money and an IFA. Yeh they are there to make money, they're not going to give advice out for free. But I would rather go to someone else who knows what they are doing, than relying on myself.

I know at the moment my funds are mainly based in US, UK, Aus, with no exposure to Europe. So I know that much, I want to go Europe wise, but then further on, I have no idea what in Europe to go for. Small Companies? Higher Income? Index? Growth? Yes I have tried to learn and somewhat have not found material about what these mean, which is why I then think, well I can go to an IFA and find out what I should invest in, and why.