HSBC World Selection Dynamic Portfolio

welshbabe2

I invested £20,000 in the HSBC World Selection Dynamic Portfolio in April this year, I was persuaded to invest as they reported returns of around 15% per year. The investment is now valued at just over £16,000 and I’m starting to panic. I’ve contacted the HSBC and I’ve been told not to worry they are the world’s biggest bank, shares go up and down, etc, etc. I appreciate this is a medium to long term investment, but need someone to allay my fears and advise. Thank-you

Linton

Why fears? You know that shares will rise and fall with the world market, and the world market is a bit nervous at the moment with the Euro problems. You should be thinking of time scales of 5 years at the very least, with 10 years being a more sensible value - in 10 years time today's events will be a distant memory as will another half dozen shocks to share values.

You havent lost anything yet as you havent sold. You bought x units in the fund and you still have x units in the fund. You bought the fund on the basis of its potential value in say 10 years time. Has anything changed?

What you should not have done is buy the fund because it increased in value by 15% in the previous year and expect that to be repeated. The previous year was unusually good as the world markets recovered from the initial credit crunch, although there was an even larger temporary fall than this years drop during 2010.

In my view the worst thing you could do is to sell. In that way you would turn a recoverable fall into a guaranteed loss.

dunstonh

, I was persuaded to invest as they reported returns of around 15% per year.

Really? The funds havent been running long enough to give any such comment unless you happen to pick a very limited period when everything went up (good and bad).

I’ve contacted the HSBC and I’ve been told not to worry they are the world’s biggest bank, shares go up and down, etc, etc

You are not invested in HSBC. You are invested in their low quality and expensive portfolio funds. HSBC are a sales outfit and you got sold an HSBC product.

That said, there was a market drop of around 20% in August. So, you should expect a short term drop in value. Investments always zig zag in value. Even the best ones. That is normal. Whilst you never know when the gains and losses will occur, you could think along the lines that in a typical 5 year period, you would get one year with big gains, one with big losses, one with average gains, one with average losses and one year that does virtually nothing. You dont know what order they will come in (although if the market has just had a 30% drop, then you wouldnt typically expect another 30% drop to occur in the short term - possible and some declines are slow but I'm generalising here to keep it simple). Over the period, you average out the ups and downs and the ups historically outnumber the downs and you have dividend distributions each year which can buy more units and give you compounded returns over time.

There is good reason why your investment is down. That shouldnt worry you as it is expected in your time period. However, you have been misled if you thought 15% was the norm. It suggests you were "sold" a product on false expectations and poor information and could even be mis-sold. On those HSBC portfolios, I would think a long term average of 5-7% p.a. is more in line with expectation. The response they gave to you about HSBC is poor as well as HSBC are irrelevant to your investment.

IronWolf

When an HSBC investment "advisor" (read salesman) sold me one of the World Selection funds (Id gone into the bank to open a new savings account by the way!), he showed me the past history by (and Im not making this up) logging into the account of one of his other clients and showing me the amount she had put in and what it was now worth. It had made about 20% in a few months so I thought great, count me in. That was when I was a novice though, im a little more informed now.

Personally I wouldnt sell now, even though its a rubbish fund, but Id be looking around for alternative funds and reading up a bit. If it recovers to what you put in (which it should, question is when) then Id get out of it and into something better.

Archergirl

Some of the 'loss' may be to do with the fees you would probably have paid to the 'Fund Manager'. Don't panic Mr(s) Manering!!

ferryguin

hmmm... sounds all very familiar. I was msiled / mis -sold this product in the balanced portyfolio ( medium risk ) and I was told there'd been some 30% retrun over the first 3 years ! I invested 51k it's now worth 45k - so I'm a bit nervous too... but I guess I'll hold on to it and follow advice given in this thread. They are a bunch of slaesmen ( ebing polite here ) and I would't let myself get suckered again. I'd put it in the Post Office or buy a piece of land. I'll be back here in four years and tell us all how it's going...

ferryguin

hmmm... sounds all very familiar. I was msiled / mis -sold this product in the balanced portyfolio ( medium risk ) and I was told there'd been some 30% retrun over the first 3 years ! I invested 51k it's now worth 45k - so I'm a bit nervous too... but I guess I'll hold on to it and follow advice given in this thread. They are a bunch of salesmen s h y s t e r s ( I'm being polite here ) and I would't let myself get suckered again. I'd put it in the Post Office or buy a piece of land. I'll be back here in four years and tell us all how it's going...

welshbabe2

Thank-you for your advice, I have only ever invested in fixed rate savings accounts before but as the rates are so low, I was persuaded that this was the account for me, 15% compared with 2-3% seemed a no brainer!
I feel like I’ve been duped by a second hand car sales man, leaving the show room with what I thought was a Porsche but was actually a clapped out Lada.
The portfolio was presented as a really safe bet due to the world diversity and being managed by the industries experts, hence the expensive fees. Bizarrely, before I invested I was asked to fill in a questionnaire which showed I was a “risk taker” and bingo this was the account for me!
Obviously I won’t sell as I can’t afford the losses, so I will sit tight and hope things improve, I just feel annoyed that I trusted a large institute that sold me a poor quality portfolio on the back of their size and reputation.

qpop

welshbabe2 wrote: »

Thank-you for your advice, I have only ever invested in fixed rate savings accounts before but as the rates are so low, I was persuaded that this was the account for me, 15% compared with 2-3% seemed a no brainer!
I feel like I’ve been duped by a second hand car sales man, leaving the show room with what I thought was a Porsche but was actually a clapped out Lada.
The portfolio was presented as a really safe bet due to the world diversity and being managed by the industries experts, hence the expensive fees. Bizarrely, before I invested I was asked to fill in a questionnaire which showed I was a “risk taker” and bingo this was the account for me!
Obviously I won’t sell as I can’t afford the losses, so I will sit tight and hope things improve, I just feel annoyed that I trusted a large institute that sold me a poor quality portfolio on the back of their size and reputation.

My apologies but I've read suitability reports from HSBC's tied advisers, and they go into quite some detail about the risks to your capital. The risk profile questionnaire that you filled out is standard fare across the world of investments (that being said, a further conversation should have happened explaining and discussing your particular attitude to risk). There has to be an element of personal responsibility in these situations.

Whilst the report may not have been spelt out to you, you will have been asked to read it thoroughly, the idea of 15%+PA appealed to you, despite the fact that, logically, if that was available "risk-free" surely savings accounts would be offering similar rates?

Had the investment returned you 15%+ growth, I also highly doubt you'd be complaining about the riskiness of it right now.

That's not to say the HSBC adviser explained the product properly, but if you check the documentation, I am fairly sure it'll be watertight (from a FOS complaint point of view)

dunstonh

That's not to say the HSBC adviser explained the product properly, but if you check the documentation, I am fairly sure it'll be watertight (from a FOS complaint point of view)

You often find that the actual documentation issued by the sales reps is quite tight on risk warnings and in isolation it would support the recommendation. In this case it is the verbal side that appears to have been been where the potential mis-selling is. However, in complaints, documentation is King unless there is some evidence or background which could indicate a balance of probability that something said was wrong.

I think it needs to be said again that HSBC will sell HSBC products. The fact they are poor quality and expensive are not grounds for complaint. If you wanted cheaper and better then you should not use a tied agent. You should use an IFA.

alanq

Which? reports poor advice from banks.

http://www.which.co.uk/about-which/press/press-releases/product-press-releases/which-money-magazine/2011/11/high-street-banks-offer-risky-investment-advice-says-which/