Disastrous Scottish Widows Isa

jumbly

My mother-in-law put £7k into a Scottish Widows ISA in 2000, just after my-father-in-law died, using the insurance money she'd received.
I believe it was on the advice of an IFA working in a branch of barclays, and when she told me at the time, I thought it was probably about the safest thing she could have done with it.
She has now been told that it is now only worth c. £6.5k!!!
I have yet to examine any paperwork she has on it, but she assures me that she has been told this twice, and that the reason for this is the under-performance of the stock market in recent years.
Can anybody tell me if this is indeed possible, with these fantastic, tax-free vehicles we were ( and still are ) told to invest our first £7k of savings in?
To get a small return after this time would have been disappointing and would totally defeat the object of an ISA, but to come out with less seems unbelievable.
If it is true, is there any course of action she can take as I feel that she has been badly advised/mis-sold as she would never have agreed to anything risky, especially at that time as she was left financially compromised as a result of my father-in-law's death.
I believe she intends to close the account immediately & transfer the money somewhere else.
I would welcome any comment that could shed light on this issue e.g.- have there been such disastrous ISAs out there? If so, why can't I find any info on them? Can anything be done about it at this stage?

SeanW

The ISA its self is not a bad thing or the problem. An ISA is just a tax-free wrapper to put another investment in.

Looking at past performance depends on what's within the ISA, you would need to post any more information you have about it, such as the full name or description of the product, then you maybe able to use this to find the performance.

I assume that the units invested in where not Income units, and therefore no income has been taken consistently from the ISA.

Are you sure the IFA in Barclays was really Independent and not tied to the bank?

It could indeed be disastrous, if the investment consisted of just 1 fund, for example, if it was the Global Growth fund within there, it has consistently underperformed the sector, and is down 4% over last 5 years

dunstonh

Barclays advisers are tied to Legal & General. Lloyds TSB is tied to Scottish Widows and is the only bank that is. IFAs are not tied to anyone but dont work out of high street banks.

Its probably a FTSE100 tracker ISA and no doubt all invested in just the one fund. Typically poor quality investing but that isnt the fault of the adviser. Tied agents arent allowed to recommend investment portfolios.

The ISA isnt at fault at all. She shouldnt withdraw it but transfer it to an alternative ISA and invest it in a manner that is appropriate to her level of risk.

You should also check that there have been no withdrawals on it, including distribution of income.

If it is true, is there any course of action she can take as I feel that she has been badly advised/mis-sold as she would never have agreed to anything risky, especially at that time as she was left financially compromised as a result of my father-in-law's death.

Whats risky? Leaving it in a bank account has some risk. Everything has some risk. Its a case of finding acceptable risk.

Part of her problem was not seeing an IFA as she thought but seeing a tied agent. Bank tied agents are not a good place to go to get investment advice. They cant build proper investments and returns are usually sub-standard. You cannot complain about investment performance.

tom188

Can anybody tell me if this is indeed possible, with these fantastic, tax-free vehicles we were ( and still are ) told to invest our first £7k of savings in?
To get a small return after this time would have been disappointing and would totally defeat the object of an ISA, but to come out with less seems unbelievable.

It is not the fault of the ISA, this is just a tax free wrapper for a product. It is a fault of the product and the timing. If she had invested a year or two later once the market had crashed she would now be sitting on big gains. The market was higher then than it is now. There are many funds that are still trying striving to reach levels seen six years ago. Alternatively she could have invested in a fund that performed throughout this period.

I would welcome any comment that could shed light on this issue e.g.- have there been such disastrous ISAs out there?

She could have invested her money in Marconi shares inside the wrapper, and now be left with less than a £1.

If so, why can't I find any info on them?

Look at the underlying performance charts of the fund somewhere like citywire.co.uk or ft.com.

Can anything be done about it at this stage?

Well you can investigate whether she has been miss sold, but I would imagine she sadly got advice from the wrong place and invested at an unfortunate time in a poor quality product.

Never get investment advice from a bank.

jumbly

Thanks SeanW & DunstonH & Tom188, You're right DunstonH, it was Lloyds TSB not Barclays as I first thought (my mother-in-law's just come in & dug the paperwork out), and it was in "The Environmental Fund", which must have been one of the useless single unit investments you mention.
I hear what you're all saying re. the ISA being a vehicle/wrapper.
It's just that it also seems to lend whatever's "wrapped up" in it an "air of respectability", shall we say - rather like seeing an advisor in your friendly neighbourhood big bank!
She maintains that it was an IFA she saw in a Lloyds branch who assessed her risk aversion as "cautious", and then recommended this ISA.
She has been advised this time to transfer it to the "Dynamic Income Portfolio" and has been told that is a safer bet.
How adventurous or risk averse would you expect someone in her circumstances to be? - i.e. recently bereaved, who's husband's life was not insured as much as expected (she had to keep working til pensionable age, despite health problems) & he had also run up credit card debts that she was unaware of.
She told the "IFA" all this and they still recommended something totally unsuitable (perhaps the advisor thought it was time her luck changed!) ( I know of course we wouldn't be saying this if the fund had done well, but then she wouldn't have been aware of the exact nature of the fund -nor would she have realised how exposed she'd been ).
If what you say is correct DunstonH, it must have been a tied agent she saw.
It's a shame that this can happen to vulnerable people (as she was at the time), with no recourse available.
Can this still happen, even if someone has evidence in writing of their "risk aversion" status, and it conflicts with the recommended investment?

Anyway, off to sort out my own poor-performing endowments now - 2 mortgage, 1 savings (now destined for mortgage also due to poor performance of other two!) - any thoughts on my savings endowment which has just matured with Pearl at £11.8k after 15 years@£50/mth. ( I was young then, and pictured myself walking into the Porsche dealership in 2006 with my BIG FAT cheque! - encouraged by Mr Pearl who told me to think of it in terms of DOUBLING my £9k total investment AT LEAST ) Unfortunately lots of things have happened since then such as marriage,house purchase,kids, envisaged promotion did not materialise, stock market slump etc.
Can a savings endowment be classed as mis-sold?
Do you know of any nice second-hand Mondeos?

seaniboy

jumbly wrote:

Do you know of any nice second-hand Mondeos?

they are not nice brand spanking new lol

ManAtHome

Oh yes they are (and it's still good now it's not so new)...

dunstonh

She maintains that it was an IFA she saw in a Lloyds branch who assessed her risk aversion as "cautious", and then recommended this ISA.

Lloyds do not have any IFAs as mentioned. They operate a tied salesforce which sells LTSB versions of the Scottish Widows products (used to be branded LTSB Life/financial services and Black Horse Life/Financial Services before that). When she started, it may would have been around the time that the rename to Scottish Widows took place and that could be confusing her. Tied agents are notorious for trying to give the impression of independence when they arent and it wouldnt have been hard for a tied agent to drop in the Scot Widows name as an example of not using a LTSB product.

An IFA would have sold a fund supermarket ISA. Although they were in their early days in 2000 so it may have gone to an investment house like Gartmore or Invesco Perpetual. Scottish Widows retail funds wouldnt have been chosen by most IFAs (although Scottish Widows Inv Partners have some good funds but they arent available on LTSB branches).

The fund she is currently in has done very well over the last 2 years. It does appear to be above her risk profile though and the alternative solution they have recommended is not really a decent solution. Single fund investments are old fashioned and will result in lower performance over the long term.

Bank tied agents cannot give investment portfolio advice and their sales process usually steers to one fund and it gets documented that the client (or customer in the case of a bank) chose that fund.

encouraged by Mr Pearl who told me to think of it in terms of DOUBLING my £9k total investment AT LEAST ) Unfortunately lots of things have happened since then such as marriage,house purchase,kids, envisaged promotion did not materialise, stock market slump etc.
Can a savings endowment be classed as mis-sold?

Pearl.... oh dear. AAA rated company in the 80s and ripped apart and asset stripped in the 90s by AMP who almost self destructed themselves by making some disastrous decisions. If it is a Pearl bonus account or ISA bonus account you can get out without penalty after the 5th anniversary and you should. The ISAs can be transferred to other ISA providers. If its a savings endowment it may be near the end of its life as they withdrew those around 98/99. The Pearl sales process wasnt very robust. Their reason why letters were virtually standard text. Everyone seems to want to save for "a boat". You can make a complaint if you think you were mis-sold but the important thing here is that you cannot complain about investment performance. Only risk. If you wanted a savings plan with a low risk (and Pearl is low risk as they have no market value reduction) then that is what you got. The fact its naff doenst come into it.

jamesd

jumbly, if she's interested she should really have a chat with an IFA set up to handle investments, as dunstonh is. Not all are and not all like that business. Some take it anyway when they shouldn't. Given five more years doing that she's likely to end up better off than if she'd been in a bank savings account all the time. At a minimum she'd need to have the investments adjusted once a year. It's not something you can really leave completely untouched.

Yes, people can still tell you to make completely wrong investments for your declared risk. And if they are a real IFA and they do that, you are entitled to at least some redress.

dancingfairy

Can she not put the money into a cash mini isa? There is a very low risk with these and you cannot loose the money you put in - you just get interest. Yes it may only outperform inflation but that's got to be better than investing it in the hope of getting lots but not understanding that the value will change as the stock market does?

Perhaps a chat with an Independent adviser (IFA) would help - I believe they have to tell you how they are going to get paid whether upfront or whether they take a protion of your investment amount. At least you will know where you stand before you agree to receive any advice. Also you do have redress if they have missold to you whereas I'm not sure if the same is true for tied advisers.

The safest thing to do is possibly put it into a bank but maybe a general finance check up would be good too. It would depend on what other products she has.

dunstonh

Perhaps a chat with an Independent adviser (IFA) would help - I believe they have to tell you how they are going to get paid whether upfront or whether they take a protion of your investment amount. At least you will know where you stand before you agree to receive any advice. Also you do have redress if they have missold to you whereas I'm not sure if the same is true for tied advisers.

If it is a transfer between ISA providers you should be aiming for no more than 1% initial commission. Some will do it for free if they have an exisiting family relationship or there is other business.