Ripped off by financial advisor? Ombudsman?

princeofpounds

dunstonh wrote: »

That is not lame. That is consistent with what you would expect on average considering the markets are currently down. Investments zig zag and sometimes they perform less than cash and sometimes better. In the short term, you expect periods when its less but in the long run the gap between cash and investments will growth normally. She is still very much in the short term.

The investments matured sometime around the beginning of 2008 actually to be clear, so the whole market drop isn't applicable. She's been trying to correspond with the bank every since but it's hard for her to articulate what's gone wrong precisely because she doesn't understand it.

But don't get me wrong, the complaint is not about the performance of the product, which in itself is probably not so bad. It's as she said; 'I told them I didn't want to be playing the market, I just wanted an income'. So surely my basis for comparison should be a deposit account (and 3.6% wouldn't have been a good rate over that period).

I'm hoping these quotes from her are accurate recollections! But I think they are because she is not the wishful thinking type and seems more mystified than upset. I guess I will have to get hold of the initial assessments to be sure.

dunstonh

Can you clarify something, the bank wouldnt typically offer money unless you have put in a formal complaint and this is their outcome. Is what they are offering coming from their complaints team?

princeofpounds

No, it's a verbal-only offer so far and I don't know if it came from a complaints team. I think someone more senior did get involved but from the same department from what I understand.

dunstonh

If it was a formal complaint then at the start an FSA complaints leaflet would have been given out and an explanation of the complaints process. The offer would also be made in writing.

Banks make a fortune on discretionary investment management and are typically pretty rubbish at it (but thats something else). If the investments were still there I may have thought they were doing a bit of rebate in the offer as an incentive to stay but with the investments closed there seems no real reason for them to offer anything that is not formal.

princeofpounds

dunstonh wrote: »

If the investments were still there I may have thought they were doing a bit of rebate in the offer as an incentive to stay but with the investments closed there seems no real reason for them to offer anything that is not formal.

Because I was trying to focus on the past investment, I omitted to mention that there is now the question of how to reinvest! They are describing the ability to make the goodwill payment as contingent on reinvesting the money with them for another term - they say they are paying on the commission they would get because they 'feel bad' about it. I guess it has been in some kind of holding investment in the interim, that I don't know about.

Of course I'd love to know the financial product you could get an 8.2% commission on! So it's clear to me that explanation is a load of hogwash and they are paying money to get the case shut.

It leaves a bad taste in the mouth to know that they are acting unprofessionally and not just being upfront and honest about what any errors were.

cottager

mrkoherence wrote: »

Hi Everyone,
there is a site I have found

Why are all 10 of your last 10 posts on 10 threads all about the same thing?

dunstonh

They are describing the ability to make the goodwill payment as contingent on reinvesting the money with them for another term

Right, so basically its a rebate of the commission.

hey say they are paying on the commission they would get because they 'feel bad' about it.

More likely that subsidising a little up front is worth it as they make more over a 5 year period.

Of course I'd love to know the financial product you could get an 8.2% commission on!

The service you have described is not a retail financial services product an adviser would recommend. Its discretionary fund management. Hence my earlier comments on the differences. The banks are really heavy on these. Natwest and Lloyds in particular. I have taken many of their investments off them over they years, especially lloyds. They double charge effectively by going heavy in unit trusts at full cost (meaning they get commission) and charging a 1% fee on top and buying and selling periodically which generates more income. The last Lloyds one was way too heavy in Scottish Widows as well which was a bit naughty for something that is meant to be independent from their own insurance company. I digress....

princeofpounds

Yes I hadn't thought there might be a double-layering to the fee structure, so with a 5% inflow charge and several years of management charges maybe they could total up to 8% over the life of the product. I guess I'll see when I head up there in a few weeks.

I'm also thinking about whether it's worth consulting an IFA in the area... Do you think they would be able to at least offer a competitive quote for similar products?

dunstonh

I'm also thinking about whether it's worth consulting an IFA in the area... Do you think they would be able to at least offer a competitive quote for similar products?

Should be able to wipe the floor with the bank when it comes to charges. However, the problem is that you would still be looking at risk. If risk has proven to be an issue before then it will be an issue again.

princeofpounds

OK, so I got to go and see her over the weekend, and it's now become a bit more evident what has happened.

She'd previously had the money invested in some residential property after selling the business, on which she had been getting a yield. She then received an offer to have the property bought from her, and (luckily it turns out!) accepted it. So bringing in the private bank a couple of years ago was really to get some advice on how to replicate the yield-like features of the property in financial instruments. She had been getting about a 7% yield on the property at the price she sold at, and so had an aim to get a little bit less than that through the bank (recognising that there was less risk in diversified financial instruments than renting a couple of small houses). She said she had never wanted to 'play the markets'.

The story she told me was that she had always tried to be quite clear on this, but that the financial advisor wasn't really listening and ended up shunting her into another product. It was a classic case of thinking because she was paying for the advice it must be right, so she acquiesced.

It turns out that instead of a fixed annual income along the lines of a LT fixed deposit account she was given an fund of funds containing 66% market-traded bonds, with the remainder in equities. This resulted in a variable income with capital at risk.

It's evident to me that the asset allocation the bank chose was not wholly inappropriate for her circumstances. So I don't think I can accuse the bank of misselling, just exceptionally poor service. I have however got her to ask for the initial fact find and planning questionnaire so I can see exactly what was written down at the time. If it turns out there was a wholesale disregard for her wishes, then we may look at complaining. If it was just a miscommunication problem (or her having a different recollection of events! Which is actually unlikely knowing her) then we'll probably leave it if they shape up and give a better deal from here on in.

I did have one other big concern however. The bank were charging about 1% for the discretionary management service. Then they used their own fund of funds. Then their own funds of funds invested mostly in their asset manager's funds (different name, same bank in reality!). So they were charging three layers of fees that probably totalled to around 3%! Given that these were not high-yielding investments anyway, and the equities suffered recently, the bank were taking more than half the income these assets were actually generating.

I thought discretionary investment managers had a fiduciary duty to invest in their client's best interests (they ARE a whole-market advisor supposedly, not that you would know from their product selection, but I checked the paperwork) but it's entirely clear that they just moved her into the fattest fee structure they could conjure up.

Anyone (dunstonh?) got any thoughts about their behaviour? There's also the question of what to do going forwards, but I'm going to leave that for another post.