Bad advice received - any comeback?

pachmarhi

A few years ago we received a small inheritance and went to the bank for advice on investing this ethically. Chose them because they were "independent". We stated that we did not wish to invest in the stockmarket and that we were looking for low risk investments. Even with ISAs we stated we wanted cash only. Not knowing much about investment products we took their advice and opened two PEPs without realising that these were stockmarket based investments. A year later the stockmarket crashed. When we went back to them to talk about further investments (we had not yet received any statements on the first lot of investments) it turned out that our "adviser" no longer worked there and even our file had disappeared. The person we then saw said that the product we had taken out was a high risk product. They said they would switch it to a different fund with the same investment company that would be less risky. We had also talked about other possible investments but after finding out that the first advice had been so bad, decided not to take that any further. I'm afraid we are hopeless with knowing how to do these things and the loss of several thousand pounds because of the bad advice left us depressed and we failed to do anything further about this. We now find out that even the switching to a less risky fund never happened. The money has regained some of it's value but is still worth less than the initial investment. The money is still sitting in the same PEPs. Is there anything we can do to complain about what happened and would we be entitled to compensation? Should we pull our money out now? At a loss to know what to do.

tom188

Sorry but how exactly is a bank independent?

pachmarhi

That was their claim. Coop Bank. The products were not their own and they were not tied to any particular company's products.

EdInvestor

What fund(s) is the money invested in?

dunstonh

There are a number of inconsistencies here.

Even with ISAs we stated we wanted cash only. Not knowing much about investment products we took their advice and opened two PEPs without realising that these were stockmarket based investments. A year later the stockmarket crashed.

ISAs and PEPs did not exist together. You couldnt have opened two PEPs a year before the last stockmarket crash.

Is there anything we can do to complain about what happened and would we be entitled to compensation?

Compensation is rarely given on financial services issues. You get financial redress to put in the position had it not occurred.

You can of course complain. However, there are some things that work against you.
1 - your story is inconsistent.
2 - you reviewed the situation back in 2002/3 and took no action. Why did you not complain then?
3 - investment returns are not something you can complain about.
4 - you went to the bank about ethical investments but now say you didnt want stockmarket risk. If your requirement is ethical investing, then stockmarket is what you are going to get for the bulk of it.

It doesnt mean your complaint wont be upheld but you are giving enough information for co-op to suggest that your complaint has more to do with investment returns not matching expectation. If the documentation on file with co-op is strong enough to support them in your risk profile assesment (which is probably the only area you have a chance of success) then the complaint would be rejected. If it was not strong enough or they cant find the file, then it works in your favour.

co-op operate a tied salesforce but they do have an independent arm as well that operates as a national salesforce. It has high turnover of staff and like many salesforces, it isnt a desirable way to get advice. That is not an excuse but more a comment on quality.

pachmarhi

Henderson Global Care (started off as something else - AMP, but that got taken over by Henderson). Was two PEPs totalling 12K at the start. Now worth around 11K. So essentially six years later it is worth less than we started with, which is exactly what we were trying to avoid when we said low risk and no stockmarket investments.

To answer dunstonh:
We opened one PEP each. That makes two.
1. We opened the PEPs at the end of the financial year. I think what probably happened is that they gave us forms for ISAs for the following financial year, which would have been a week later.
2. When we revisited and spoke to another adviser at the same bank he told us he would organise to move the money to a different fund (UK only) which he said would be less risky. That is all they offered to do. We have since discovered that this did not happen either.
3. It is not the returns I am complaining about, it is the fact that we specifically asked for LOW RISK investments and NO STOCKMARKET and what we were sold (in the words of another adviser from the same bank) was HIGH RISK investments in the STOCKMARKET.
4. I don't see there is anything inconsistent with requesting non-stockmarket based ethical investments. They could have told us to put the money in a building society. That may seem unlikely to you, given that we were talking to a bank, but they were claiming to be independent.

It must have been the Coop national independent arm of advisers that we dealt with.

All we want is to be in the situation we would have been in had we not taken out these investments. If you call that redress rather than compensation, then that is what we want.

Sorry but I am clueless. How do we go about complaining. Never done anything like this before.

dunstonh

Its not particulary high risk and it is an ethical fund. Its not low risk and it is stockmarket.

Its an awful fund but and has performed below sector average for many years. Although when you took it out, it was tracking the sector average more or less. It suffered badly in the crash and has performed significantly lower since. The sector average is almost break even to the peak point.

As I said, you cannot complain about performance. It doesnt matter how skilled you are in picking investments, you will always get some wrong. This highlights why picking one fund is a bad decision but that in itself was not a claimable event. Your only route of complaint is atittude to risk.

pachmarhi

dunstonh wrote:

Its not particulary high risk and it is an ethical fund. Its not low risk and it is stockmarket.

As I said, you cannot complain about performance. It doesnt matter how skilled you are in picking investments, you will always get some wrong.

I understand that. That is exactly why we didn't WANT stockmarket investments, even if they offered the possibility of higher returns.

This highlights why picking one fund is a bad decision but that in itself was not a claimable event. Your only route of complaint is atittude to risk.

By this do you mean we should complain on the basis that we asked for low risk, non-stockmarket? And what do we ask them to do?

Also how do we get rid of this bad investment? Sorry, but I REALLY have no clue!

dunstonh

The advice you given indicates a novice adviser. It is more typical of a tied agent recommendation than an independent. Although many salesforces work that way whether independent or not. The fact they chose one fund is something you cannot complain about.

Your complaint boils down to one thing only. You believe that the product sold was above your risk profile. Forget the rest. You wont get anywhere on that. That should be the basis of your complaint.

And what do we ask them to do?

Tell them that you asked for a non stockmarket investment in ethical investments and you havent been given that and that you want the investment voided and interest paid had it been in a savings account. Dont go and explain things any further. Short and sweet. You can end up saying things which give them a hook into your complaint and a chance to reject. I've shown that in the posts higher up.

Chances are, the discussion you had a few years ago isnt on record. Salesforces are notorious for not documenting conversations that occur when no sale happens. The second person carries no liability, isnt getting paid and is unlikely to spend any time on it. So, you shouldnt mention it happening. It can only work against you if you do.

Also how do we get rid of this bad investment? Sorry, but I REALLY have no clue!

Do nothing for the moment. Get the complaint in ASAP. If they void the investment and pay it back plus interest, you can deal with it then. If they dont and refuse it, then you can decide what to do.

The investment can be transferred at no cost to a fund supermarket and a more appropriate portfolio can be built to suit your risk profile. And if your requirement is still no stockmarket, then that can occur (although you should note that stockmarket is not a single risk area, its a sliding scale and lower risk stockmarket investments do exist). You can either do this yourself or get an IFA to do it for you. If you do pick an IFA, then avoid any national or large regional firms. Otherwise you stand a good chance of being out of the frying pan into the fire. Get an "independent" IFA. Not one with an employer.

pachmarhi

thanks dunstonh, I'll try and get that done this weekend.

Will let you know what happens.

If they still can't find our original file, what will happen then? Obviously I have nothing in writing that supports what I have said we said at that meeting.

dunstonh

When i said a few years back, i was referring to the 2003ish time after the crash. That almost certainly wont be documented. If it was, it would go against you.

The file they will look at is the original sale documents. How your risk profile was decided will be on there. If that file cannot be found, the complaint will have to be found in your favour as they wont be able to prove the sale is justifiable. Most endowment complaints are not upheld but unproven because of missing files. So, that is just as good for you.