Help please with investment problems with IFA and the investment company

smudge22

2 years and 1 year ago I invested a large sum of money(£171000) thru an IFA(registered) with an investment company.
I have raised some serious issues with the company following receipt of a half early valuation of my funds.
1. The valuation showed the IFA being paid twice, I questioned this and after much persuasion the co. reissued the valuation stating it was a programming problem and that he hadnt actually been paid twice although the valuation said he had. They issued another valuation, which had errors onit. They are now saying there is a program fault.
2. This made me check everything, I can not see any interest being paid on cash held, there are other discrepencies between the valuations.
3. The IFA when we 1st met completed a risk evaluation, I was graded as 3 out of 6, the decription of which I was happy with. The investment company put me in risk 5 out of 8 and their description does not match the IFA'S.
I have paid in total to both of them nearly £8000 in fees and do not feel they are doing their jobs properly. In addition, over the last 10 months I have taken an income of £700 per month. The fund is currently at £154000, which is not good!
Iam awaiting there reply to the questions I have raised, but where do I go next? How can I trust someone else to do the job?
Any advice will be much appreciated.

bigfreddiel

well, without too much effort you could have taken an income of £600/month for the past 2 years and increased the value of your portfolio - just be very careful when employing an ifa - make sure you fully understand his/hers tor - in fact get some sort of performance based remuneration set up between you and the ifa - and be very clear what you expect him/her to be doing for you - get it all in writing.

hope that helps#

fj

smudge22

I have just realised that I should have been offered the option of fees by commission or a flat fee. The IFA just put commission on the form we did not discuss any options.

jem16

smudge22 wrote: »

I have just realised that I should have been offered the option of fees by commission or a flat fee. The IFA just put commission on the form we did not discuss any options.

The terms of business should have been clearly laid out in the paperwork from the IFA. What did this say?

What investment company is being used? Is it a platform?

Also not really sure what you mean by the investment company putting you in a risk 5 out of 8. Didn't your IFA choose the funds?

Perhaps say a little more about what the actual investment is.

smudge22

The forms I signed from the IFA had commission @4% but no discussion preceded this when we met, I just assumed that was his charge and there was no option.
The IFA completed a risk assessment with me and this was submitted to the company, dont want to name them but they are investment managers. The risk that came back from them was risk 5 out of 8 and doesnt really mention the sort of investments that were in the assessment done by the IFA. When I questioned this with the IFA he said that the company had put me in this risk class.
The investments are a mixture of shares, equities, property etc.

Aegis

smudge22 wrote: »

The forms I signed from the IFA had commission @4% but no discussion preceded this when we met, I just assumed that was his charge and there was no option.
The IFA completed a risk assessment with me and this was submitted to the company, dont want to name them but they are investment managers. The risk that came back from them was risk 5 out of 8 and doesnt really mention the sort of investments that were in the assessment done by the IFA. When I questioned this with the IFA he said that the company had put me in this risk class.
The investments are a mixture of shares, equities, property etc.

4% is incredibly high for the size of investment you're dealing with, it sounds like pure greed.

The mismatch of risk profiles is a concern, though it's possible that this is just a problem with matching up a 6 point risk scale to an 8 point scale. Much more concerning is the fact that you didn't get to discuss this change prior to the investments being made on your behalf.

The question of what you can do next needs further discussion. Probably the best starting point is the IFA. I'd suggest that you send him details of your concerns and request that he explains why he didn't offer you a pure fee basis and why he isn't offering a service commensurate with the level of fees you are being charged.

If he's not willing to work with you and you feel that the risk profile he described is at odds with your current investment portfolio, then you may have grounds for a complaint.

Regardless of how you choose to proceed, make sure you trust whoever you choose to retain to manage your affairs, if anyone.

The good news is that changing IFA is easy, as is changing investment manager. If it comes down to that, you have plenty of options.

dunstonh

3. The IFA when we 1st met completed a risk evaluation, I was graded as 3 out of 6, the decription of which I was happy with. The investment company put me in risk 5 out of 8 and their description does not match the IFA'S.

That is quite common. My own personal risk scale is 1 to 6 for compliance purposes but providers have their own scale. I also my own internal scale of 1 to 10 which fits into the 1 to 6. IFAs do due diligence in fitting provider scales into their own. There is no one universal risk scale. They all have different levels. Some are a bit elastic as well where you may find the the gaps between 1 to 4 are quite small but 5-10 get wider (if someone is willing to only accept a 10% loss then a 15% loss will make them nervous. However, someone willing to accept a 40% loss wont care about 5% difference)

4% is incredibly high for the size of investment you're dealing with, it sounds like pure greed.

I agree. My personal cap is £2500. So, seeing £6800 is high. Although technically, for commission, it is not uncommon. Not desirable but not uncommon. Especially from those firms that are not planning to exist after the retail distribution review.

Seeing a drop in value over the last year would not be a surprise. 2011 was a negative year on the markets. The FTSE100 was down just over 5% with a 20% market drop in the middle (so if you invested in Spring or before August, then timing turned out to be poor). if you take the commission and the withdrawals into account, the size of the drop is not big. Although considering gilts and bonds had a good year and a more cautious portfolio would have done alright. Medium risk or above would probably be down.