Sterling Investment Bond question

GMouse_2

My mother has invested £52k in a Sterling Investment Bond, a few years ago.
She's just received an update to say that it is now only worth £38k, so a loss of £14k in about 3 years! Shocking!
It's a lifetime bond - what's the general opinion, should she keep her money in this bond, or move the money elsewhere, bearing in mind she's already lost a lot, and charges might apply if she were to move her money somewhere else.
I don't suppose this sort of investment is covered in any way if the provider, Zurich, were to collapse either?
Any advice or comments appreciated.

dunstonh

so a loss of £14k in about 3 years! Shocking!

Its not shocking. Its a loss of 26% which isnt too bad.

It's a lifetime bond

Its actually a non-qualifying, single premium whole of life assurance.

what's the general opinion, should she keep her money in this bond, or move the money elsewhere

The bond doesnt make or lose money. Its just a tax wrapper. A container for investments. You havent mentioned the investments yet they are the most important thing.

bearing in mind she's already lost a lot

Its not a lot. a 26% loss is in line with cautious level of risk.

charges might apply if she were to move her money somewhere else.

Charges will apply if she surrenders it. Switches are free of charge though.

I don't suppose this sort of investment is covered in any way if the provider, Zurich, were to collapse either?

Its a unit linked investment so it doesnt need any sort of protection as its not invested in Zurich. However, there is FSCS prection of 100% on the first £2000 and 90% on the rest with no upper limit. That is really only useful in cases of fraud though (as its unit linked).

Any advice or comments appreciated.

Learn about what she has, what it can and cant do and how it works. There is no point you getting involved if you dont understand investments and the product. If you decide not to learn about what she has and she still has concerns, she can always ask the adviser she arranged it through. After all its what she pays them for.

philup1000

My Father in Law has £100K to invest which is in a Trust Fund including himself and three children as members.I think the thinking was to invest the money short to medium term with low risk to the capital.
His IFA has advised putting £50K in the Sterling Investment Bond(invested in the multimanager protected profits fund), with his and the youngest daughter named as the lives insured.
We are a bit confused as to why he has advised having this type of life cover policy, when my father in law is 80 and also this type of policy seems to have quite high commission and management charges.(qouted £14k in detuctions after 10 years assuming 6% per year growth?).
Any thoughts or opinions would be welcomed.
Thanks in advance.

gozomark

We are a bit confused as to why he has advised having this type of life cover policy, when my father in law is 80 and also this type of policy seems to have quite high commission

dunstonh

We are a bit confused as to why he has advised having this type of life cover policy, when my father in law is 80 and also this type of policy seems to have quite high commission and management charges.(qouted £14k in detuctions after 10 years assuming 6% per year growth?).

The product is actually quite well priced at the moment. There are plenty of reasons why it could be suitable and plenty why it wouldnt. What does the recommendation report say (known as a suitability report)?

whiteflag_3

philup1000 wrote: »

My Father in Law has £100K to invest which is in a Trust Fund including himself and three children as members.I think the thinking was to invest the money short to medium term with low risk to the capital.
His IFA has advised putting £50K in the Sterling Investment Bond(invested in the multimanager protected profits fund), with his and the youngest daughter named as the lives insured.
We are a bit confused as to why he has advised having this type of life cover policy, when my father in law is 80 and also this type of policy seems to have quite high commission and management charges.(qouted £14k in detuctions after 10 years assuming 6% per year growth?).
Any thoughts or opinions would be welcomed.
Thanks in advance.

,

seems fine to me

Sterling have higher than average allocation rates, gives access to the unique "protected profits fund" as well as all the usual "top" external funds, has a ten year capital back guarantee , flexible adviser renumeration options backed by the finacially strong Zurich Group.

The bond allows multiple lives which makes it more convenient than unit trusts( and because of the charging structure it can be much cheaper)

The life insurance is 101% of the bond value on death an is there for the bond to qualify for certain tax concessions.

Unless your adviser is taking max commission (7%) then there seems little wrong with the recommendation.


One question for you- if your confused why your father's adviser is recommending you this product what is preventing you from you asking them the questions youve posted on here?

whiteflag_3

dunstonh wrote: »

The product is actually quite well priced at the moment.

agreed

There are plenty of reasons why it could be suitable and plenty why it wouldnt.

]

Ive posted the reasons why , what would be the plenty of reasons why it wouldnt?

whiteflag_3

gozomark wrote: »

We are a bit confused as to why he has advised having this type of life cover policy, when my father in law is 80 and also this type of policy seems to have quite high commission

yeah yeah - seems to have quite high commission , but we dont know if it actually does.

gozomark

agree - need more info

philup1000

Thanks for the replies.
We are having a meeting with the ifa to discuss and ask questions, which is why I wanted some other more informed opinions on the product.
There dosent appear to be a suitability report with the documentation that we have been sent.
Says initial commission would be £1600 immediately and then paid monthly depending on performance I think.
DunstonH, thanks could you give any possible reasons why it might not be suitable?

dunstonh

DunstonH, thanks could you give any possible reasons why it might not be suitable?

Attitude to investment risk not matching. ISA not used first (see more on that further down). Ability to understand. Thats about it really.

The commission itself doesnt really matter in the scheme of things. It has nothing to do with suitability of advice. Its 3% compared to the maximum of 7% so its not a high commission. Even then its not in direct correlation with the product charges and Sterling, as already mentioned, are well priced. So, the charges are not high. There are providers who pay more commission and have higher charges. So, nothing there seems to be an issue.

The protected profits fund is actually quite a good fund, especially suited for the inexperienced investor and/or more cautious investor and is only available on the Sterling Bond. Investments with guarantees do tend to be a bit more expensive than those without. The cost of the providing that guarantee has to be factored in.

The investment bond can also be placed in trust and that could well be the key reason it was used (ISAs cannot be placed in trust and that would eliminate the ISA option).

So, really when you look at it based on the limited information we have available, there is nothing that suggests that there is anything wrong with the recommendation.

There dosent appear to be a suitability report with the documentation that we have been sent.

It is issued by the adviser either pre-sale or up to 10 days after the sale (or commencement date). It would basically give the reasons why it was recommended and why potential alternatives were excluded.