St. James Bank: bad ISA rates?

Butterflymind

Hello all

This is a bit of a moral dilemma. My elderly neighbour has savings (i don't like to ask how much), and very proudly told us his financial advisor is moving them into a great rate ISA at over 7% at the above bank.

However, he also says he doesn't understand finances, and leaves everything to his FA to sort out, but enjoyed getting their lovely leather bound booklet! He didn't ask us to check, but, for such a good rate, I was surprised it wasn't on MSE already , and thought maybe we ought to move ours.

Unfortunately, no such rate existed on their web-site, so we are now worried that he may be getting less than the best advice, and don't know what we should do. We don't want to worry him unnecessarily as he's old and in poor health, and, people can be over-sensitive if you mention money matters. Does anyone else out there have advice for us to pass on, or how to phrase it in a non-worrying way?

opinions4u

St James' Place Bank is basically Intelligent Finance (HBOS/LBG).

Linky

Company Information
St. James's Place Bank is a division of Bank of Scotland plc. Registered in Scotland number SC327000. Registered office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland is part of Lloyds Banking Group.

Their cash ISA rate is 2.5% which is ok. Whether it was 7% in the past, I can't recall, although certainly not in recent years.

It is possible that he has a stocks and shares ISA with SJP which could, quite easily, be a corporate bond fund with a 7% yield?

Unfortunately, no such rate existed on their web-site, so we are now worried that he may be getting less than the best advice, and don't know what we should do. We don't want to worry him unnecessarily as he's old and in poor health, and, people can be over-sensitive if you mention money matters. Does anyone else out there have advice for us to pass on, or how to phrase it in a non-worrying way?

Unless you understand what product he has and why he bought it, I feel that you will only serve to worry the gentleman by rocking the boat on this one. I'd steer clear.

dunstonh

It could be a St James Place sales rep trying to sell a corporate bond ISA with a yield of 7%. I just looked up the SJP Corp Bond on financial express and current yield is 7.5%

but enjoyed getting their lovely leather bound booklet!

St James Place tend to be very slick and this is not uncommon for them. However, their charges are heavy. So, in reality, he has actually bought the leather bound booklet a number of times over!

so we are now worried that he may be getting less than the best advice

He isnt getting the best advice. He is seeing a tied sales rep who is only authorised to recommend the best product from his employer. Not the best product full stop.

We don't want to worry him unnecessarily as he's old and in poor health, and, people can be over-sensitive if you mention money matters.

Anything you do will create worry. However, you have to measure the fact whether the worry is worth it to stop him being mislead or if its better to stay out of it. The concept of investing is not wrong (although his health may mean that it could be). If he relies on the income then corporate bonds can make very good sense (Although a provider with death guarantee may be better if he has dependents). The SJP one isnt very good but that isnt really the issue here as who would be best is a different conversation. You need to to decide if its better to keep out of it or get involved but possibly create friction and worry.

jamesd

One possible point of confusion: bonds and bonds. Banks commonly call their term deposit savings accounts bonds and those pay a fixed amount with FSCS guarantee of the capital value. Same for a cash ISA. But a bond in investment terms has a variable capital value. There are many bond funds out there that are paying 7% or more at the moment but if inflation increases in the UK their capital value will almost certainly decrease if they are providing income from the UK. If the sales person described it perfectly correctly as a bond he may think he's getting a savings account with guaranteed capital value. He also won't be able to move the money back to a cash ISA again, it's only possible to go from cash ISA to S&S ISA, not the other way.

If he or you want a bond fund in a stocks and shares ISA he might usefully consider opening an account with Hargreaves Lansdown and buying something like the Invesco Perpetual Monthly Income Plus fund. That'll be a cheaper buy than anything via SJP and is likely to do better when inflation increases because about 15% is in shares, which are likely to be growing even if the bond part is dropping. To give an idea of how competitive this is, there's a 0% initial charge and the ongoing annual charge is 1,25%, 0.125% of which is returned via a loyalty bonus account.

If he's still within a time when he can cancel, he can do better for himself if he does.

Please do ensure that he at least knows that his capital value is not protected in this type of bond and that he can't just switch back to a cash ISA later.

Butterflymind

Hello all

It's very kind of you to double-check this for me, obviously my skills at research aren't up to scratch on surfing, etc - I'm still very much a newbie. You've relieved my mind at least to some extent - that this higher rate does actually exist in the ISA bond (rather than the cash ISA we assumed it was), as I was wondering if he'd been misled on this altogether, and we've been worrying about it.

jamesd & dunstonh: Wow, this is really detailed research. Thanks for this, I think I will bite the bullet and 'casually' mention in conversation that we've been shopping around on the MSE site ourselves, as there are a lot of great products, and advice. But that as SJP have high charges, we are thinking in investing in Invesco's product instead (or something similar).

Then at least I will feel better that we are mentioning there are better products out there without worrying him. As he's only moved over to them (SJP) last week, he might have a chance to change his mind and transfer if he feels he wants to.

I don't think he's aware of the unprotected capital value in a bond, he freely admits he's not very good at finances (neither are we but we are learning on this site!), so I am hesitant to mention that part to him which may alarm him. But at least I will feel that he can make a better choice. Either to stick with the FA's advice if he still feels best served by that, or, go back to the FA to ask about another product (e.g. like Invesco). And he will feel more confident hopefully to ask. Also, if the FA's aware my neighbour has 'back-up' from friends, he may be less cavalier about offering expensive products.

However, he may feel perfectly happy about what the FA's done, and satisfied with the product, or, can't be bothered to change again. In which case I wouldn't press him on it. At least I would feel I've made him a bit more aware of other products out there - but, the real choice is entirely up to him. He keeps telling us that his by-pass will probably not last out much longer (which we don't like to hear and keep telling him not to focus on that, just to enjoy his life), so, in the long run, I wouldn't like to think of him stressing about his finances in his last years...

But a very tricky situation.... I think opinions4u has a very good point as we aren't entirely clear what he has and don't want to ask or frighten him.

Thanks again for everyone's help, it's very much appreciated, and helps me to think more clearly about how to help/advise him. It really confirms what I thought, that he isn't getting the best product out there.

BM:A

dunstonh

As he's only moved over to them (SJP) last week, he might have a chance to change his mind and transfer if he feels he wants to.

Lloyds is about to sell SJP. So, the future of them is not very strong.

Either to stick with the FA's advice if he still feels best served by that, or, go back to the FA to ask about another product (e.g. like Invesco)

You cant ask the FA about other providers. SJP dont employ IFAs. They are tied sales reps. They can only sell SJP products. You need to see an IFA to get whole of market access.

Butterflymind

Hello DunstonH

Sorry, I missed that point first time around, trying to whiz through it in my lunch break. He did mention that his FA was moving elsewhere a few month's back, and asked my neighbour if he'd still like to be his client, which he agreed to.

It's clear from what you say that the sales agent hasn't told him it's a non-biased role that he has, or, that he's no longer an independant FA! My neighbour is a gentle, kindly, sort, and probably wouldn't even dream of questioning it, preferring to believe his 'FA' has his interests at heart. It makes it all the more harder to approach him and let him know...:(

Butterflymind

Hello DunstonH and all

I have told my neighbour about the advice here, and fortunately he's ok about it, as he doesn't have all his life savings in there thank God. he wanted me to check out his finances, but, I advised him to try a second opinion from a real independant FA; at least then he can make an informed choice about what he'd like to do. Very much appreciated all the advice from you all.