Help - Poor Performing Investments and Maybe Advice

bigtired24

Advice really appreciated.

I went to the Halifax today with a friend of my fathers (Pete) for a review of his investments.

In summary, Pete sold his house in 2006 and had £110,000. He is 68 years of age, on a basic pension, and is not financially literate.

His says that he wanted to invest his money safely in a high interest earning account that could be relatively easily accessed (3 months?) if needs be. He was told he couldn't do this..... He also described his consultation as being akin to timeshare pressure selling.

The position is that he has £56,000 in a PIP (worth £48,000 today), and £4,500 in a stocks and share ISA (worth £3,500) today.

He also has £26,000 in an ordinary bank account currently earning 0.5% before tax!

I have a number of questions and concerns.

1. Would Pete have grounds for being badly advised by Halifax? The advisor we saw today was very defensive, and he didn't like me being there, I am an accountant but not a financial advisor. I am just more financially literate than Pete.

2. How safe is Pete's money in terms of the Govt guarantee. I believe his ISA and his ordinary bank account is protected by the guarantee, but his PIP is only partially protected (£2k @ 100% and up to £48k @ 90%?).

3. I have told Pete that he needs to think about wheter he cuts his losses on the £56,000 PIP (worth £48,000 today), and the £4,500 in a stocks and share ISA (worth £3,500) today (loss of circa £9,000) or whether he waits for the market to recover given he does not need immediate access to this money. I am nervous that I am straying into financial advice for which I am not qualified.

4. As an interim measure I have advised him to move £20,000 from his ordinary bank account (currently £26,000 earning 0.5% before tax) to a better earning bank account (earning 2.5% before tax) that allows 4 withdrawls in 1 year. Hardly a big wow but at least some improvement!

All in all a sorry tale. Advice to try and improve this situation would be appreciated.

Thanks

Justin

sh856531

3. I have told Pete that he needs to think about wheter he cuts his losses on the £56,000 PIP (worth £48,000 today), and the £4,500 in a stocks and share ISA (worth £3,500) today (loss of circa £9,000) or whether he waits for the market to recover given he does not need immediate access to this money. I am nervous that I am straying into financial advice for which I am not qualified.

Hi Justin

Now clearly this is just my personal opinion, but given the gentleman's age, and what I think stocks and shares will continue to do in 2009, I would almost certainly move to cash or some other very safe asset at this point.

If the economists are correct and we are possibly entering the biggest recession in 100 years, it seems unlikely to me that the usual wisdom about western recessions only lasting 1 - 2 years could be way off this time. In fact if its true then we have to bear in mind that there will almost certainly be no-one on this board who was an adult during the great depression - so we all have very little appropriate wisdom to guide us in deciding how the market will behave in the current situation.

Even if the recession itself is relatively brief, we could also enter into a situation like Japan where the economy basically did SFA for many many years which would mean that pete's investments may well not recover in an acceptable timescale.

So on balance, I think my view is cut your losses - UK shares are going down in 2009 and could potentially take a much longer time to receover than would be "usually" be the case.

Looking forward to seeing everyone else's thoughts though. These are interesting times.

Take care

S

dunstonh

and is not financially literate.

The minute you mentioned Halifax we could guess that bit

He also described his consultation as being akin to timeshare pressure selling.

Of course it is. He saw a sales rep for an insurance company. Selling is their job.

1. Would Pete have grounds for being badly advised by Halifax? The advisor we saw today was very defensive, and he didn't like me being there, I am an accountant but not a financial advisor. I am just more financially literate than Pete.

Halifax investments are poor across the range. However, that is not grounds for complaint. Being sold to is not grounds for complaint as that is expected from sales people.

The only potential thing is if the recommendation did not match his documented and evidenced risk profile and the investments are not suited to his personal circumstances (including tax and current and future requirements).

2. How safe is Pete's money in terms of the Govt guarantee. I believe his ISA and his ordinary bank account is protected by the guarantee, but his PIP is only partially protected (£2k @ 100% and up to £48k @ 90%?).

Unit linked investments are ringfenced away from the provider. He isnt investing in the Halifax but the underlying assets of the fund. They belong to his fund and not to the Halifax. So, whilst there is FSCS protection on unit linked funds, it is really only of use in cases of fraud. The ISA falls under the investment FSCS protection not deposits but the ISA will be in unit linked funds so the same applies to unit trusts.

What are the investments as you have only mentioned the tax wrappers so far?

Now clearly this is just my personal opinion, but given the gentlemans age, and what I think stocks and shares will continue to do in 2009,

He is only 68. That is not too old for anything. Also, I dont think its right to judge 2009 performance already and consider that will continue. Two reasons for that. 1) We dont know the invesmtents so how can you judge what they are going to do. (stocks and shares doesnt have to mean stocks and shares and I put money on it either being the Halifax Cautious managed fund or Corp bond fund) 2) Many investments are up quite a lot this year so expectation that will continue at the same rate is unlikely. You also cannto measure market performance on current economic issues. The two dont go hand in hand. Stockmarket has risen 13% since October whilst media coverage of economic data has got worse.

sh856531

Also, I dont think its right to judge 2009 performance already and consider that will continue. Two reasons for that. 1) We dont know the invesmtents so how can you judge what they are going to do. (stocks and shares doesnt have to mean stocks and shares and I put money on it either being the Halifax Cautious managed fund or Corp bond fund) 2) Many investments are up quite a lot this year so expectation that will continue at the same rate is unlikely.

All fair points. My view is simply based on the fact that my gut feeling is that, overall, 2009 will not be a good year overall for stocks and shares.

This is simply based on the fact that the UK looks like its about to go into the sort of recession that you or I have never even been close to experiencing.

I'm glad you're more optimistic than me though! It gives me hope!

:-)

Best Regards

S

bigtired24

dunstonh,

I will get more info on the products he has.