Have the Inlaws been Mis Sold?

foolonastrom

My In Laws moved to France 3 years ago. They sold their UK property, bought a house in France and aimed to live off the difference (130k) for the 5 years before the first pension kicked in.

They spoke to an IFA about what to do with their 130k and were adviced to put it into Norwich Union Offshore Bond (They told me it was safe as it was in a bond!) This is NOT a bond, it's a fund of funds, which means due to the current currency and financial crisis instead of having about 100k left (they would have spent 30k to live on), they have about 75k left. This is currently still in the NU Bond, but all in the Sterling Cash Deposit (Corporate Bonds). So it is relatively safe.

My question is, would they have a case for mis selling against the IFA. He has obviously adviced them to put their retirement fund into a med-high risk investment, when he should have adviced them that it should be invested with no-minimum risk. They did say that they wanted the capital to remain safe, but they are naive investors, so possibly wouldn't have understood that the value of their capital was at risk, even if they signed a bit of paper to say that they did.

Comments and suggestions would be appreciated.

RayWolfe

I wonder what they would be saying now if this investment had taken place at a different time and they had made shed loads of money.
Would it still have been a missale?

gozomark

Sterling Cash Deposit (Corporate Bonds)

that confuses me - is it in corporate bonds or cash ? - have they changed the funds its invested in ?

the currency crisis would if anything have helped the value of the fund, to the extent any of the assets were overseas

20-25% loss in the last 3 years is not med-high risk - that would have been 50% losses given what markets have done

dunstonh

This is NOT a bond,

Yes it is a bond. Its an offshore investment bond.

it's a fund of funds,

It is not a fund of funds. Unless they are investing in a fund of funds but you later say its in the sterling cash deposit so it cant be in a fund of funds.

Sterling Cash Deposit (Corporate Bonds).

A Sterling cash deposit wouldnt be corporate bonds. It would be a deposit account or money market fund.

My question is, would they have a case for mis selling against the IFA.

Nothing you have posted suggests anything wrong. I think your problem is a lack of understanding on what they have.

He has obviously adviced them to put their retirement fund into a med-high risk investment

How can a sterling cash account be a medium/high risk?

agsnu

From a quick glance at the NU web site, they have two separate funds - SL01 Sterling Cash Deposit (down 0.2% in the year to 30/01/09) and SF14 Sterling Corporate Bond (down 12.5% in the year to 30/01/09).

What you are saying makes no sense. Was it in corporate bonds then switched to cash deposit? Anyway, even so the fund is only down about 13-14% over the 3 years so I don't know how they've lost 25% of their investment (fees?)

foolonastrom

Let me tryto explain;

The money was in a mixture of funds within the offshore bond, such as UK equity, japanese equity, UK property, etc (about 10 different funds in total)

They have now moved the money all into a single fund within the bond, which is the Sterling Cash Deposit, this was to limit any further losses on the capital.

The sterling cash deposit is a money market fund which is 80% invested in corporate bonds according to the trustnet website.

gozomark

can you put a link to the trustnet data - I can't see it

foolonastrom

Not sure the link will work as you have to have a login to see the data

http://www.trustnetoffshore.com/Factsheets/Factsheet.aspx?fundcode=NUSCAD&univ=DD&pagetype=portfoliobreakdown

Relevant info;

RankSector% of Fund
(31-Dec-2008)% of Fund (30-Nov-2008)
1(1)Corporate Bonds79.80(70.00)
2(2)Money Market20.20(30.00)


Top Ten Holdings

RankHolding% of Fund
(31-Dec-2008)% of Fund (30-Nov-2008)
1(-)ING BANK 2.25% CERT OF DEPOSIT 23/02/096.5(0.0)
2(1)ROYAL BANK OF SCOTLAND FRN 15/09/093.9(3.9)
3(-)SVENSKA HNDLSBKN 3.5% CT OF DEP 27/02/093.9(0.0)
4(-)NATIONAL AUSTRALIA BK 3.7% 10/02/20093.3(0.0)
5(2)ROYAL BANK OF CANADA FR DEP NTS 14/12/113.1(3.2)
6(-)BARCLAYS BANK PLC 5.75% 06/04/20092.7(0.0)
7(5)WESTPAC BANKING CORP FR INST 29/01/092.6(2.6)
8(10)BARCLAYS BANK PLC FLTG RATE NTS 02/07/102.6(2.6)
9(4)RBS GROUP PLC FRN 28/01/092.6(2.6)
10(-)BANCO BILBAO VISCAYA 24/02/20102.6(0.0)

gozomark

thanks - I'd have thought a fund called sterling cash would have invested in sterling cash and so no risk, but no, there is some risk being taken

http://www.trustnetoffshore.com/Factsheets/ChartBuilder.aspx?chart=8&typeCode=FNUSCAD,XDD:CBS,&w=420&h=240&univ=DD

p00hsticks

foolonastrom wrote: »

My question is, would they have a case for mis selling against the IFA. He has obviously adviced them to put their retirement fund into a med-high risk investment, when he should have adviced them that it should be invested with no-minimum risk.

Actually, I don't believe it's up to the IFA to tell your in-laws what amount of risk they should or should not be taking - he should be asking them what they want, and then advising them on appropriate products depending on their response.

In my experience, IFAs usually ask clients a series of questions to determine how risk-adverse they are. If your in-laws are sure that they actually stated to the IFA that they didn't want to take any risks with the capital at all, then it does sound like the product was unsuitable - I think you will need to ask the IFA to produce the notes from his meeting with them to establsih exactly what was said.

dunstonh

Cash funds can hold non-cash deposits but they tend to be lower risk but not risk free. However, offshore bonds dont have to utilise in-house range o funds and can usually access institiutional versions of unit trusts and deposits.

The use of the offshore bond tax wrapper is often suited to those moving abroad but with an intention to return.