St James Place Investment Bond - Misselling

swifty_2

A relative has brought the following to my attention and I am quite worried about the situation.
Background, she is 65 lives in rented accomodation and not in the best of health. She does not own any property.
Her landlord introduced her to a St James Place Partner and he sold her an Investment Bond.
The Bond make up is as follows:SJP/Property - 36.6%SJP/Jupiter Cautious - Acc 20.8%SJP/Invesco Perpetual Mgd - Acc 16.0%SJP/AXA Framlington Mgd - Acc 15.9% SJP/THSP Managed - Acc 10.7%. She has also been informed it will cost her 4% to cancell the bond. This is a lady who has been encouraged to invest her life savingings in this bond £120,000 now currently valued at £78,656. She has been taking £400 a month but has now been told to reduce it to £200. This lady has never been near the stockmarket in the past. Would you consider this misselling.

Kavanne

i used an IFA and the same thing happened to me. The value of your investment can go down as well as up!!

dunstonh

The investment bond is a valid tax wrapper. Charges are not an issue as they are disclosed on the illustration at point of sale. SJP isnt cheap but you dont expect them to be. It was her choice to buy them. So, nothing on that front.

The only potential is that her risk profile doesnt match the investments. However we dont know her risk profile.

EdInvestor

swifty wrote: »

This lady has never been near the stockmarket in the past.

This would suggest that the case needs further investigation as the portfolio of funds chosen within the bond appears to be closer to a balanced profile than a cautious one.If the lady was prepared to take a little risk (ie more than cash deposits) but only a little, you would expect the fund investments to be low risk - ie a cautious overall spread.

She should have documentation related to the sale, what does it say about her attitude to risk?

dunstonh

This would suggest that the case needs further investigation

Everyone starts somewhere and that spread wont have a heavy equity content. Certainly would mean that risk discussion and documentation would need to be more detailed than a more experienced investor though.

It looks closer to 50% cautious/50% balanced. I wonder if the risk profile was split 50/50 in those two areas? Fund spread is rubbish but thats not something you can complain about with a tied agent as they document that you pick the funds and a 50/50 split would not be uncommon and setting it up like that not unusual.

The only potential avenues here are
1 - why wasnt an ISA recommended for some of the money?
2 - why wasnt unit trust recommended for the rest? (over 100k tends to start moving to investment bonds for better pricing but SJP arent cheap so that argument is not likely to wash)
3 - what level of risk was she willing to take (noting that cash providing an income is still a risk and she would be eroding her capital now if she had it in a savings account)?

There could be valid answers to those things but they are really the only potential areas of complaint.