Helping a friend - was her 75 year old mother given wrong advice

RetiredInThailand

dunstonh wrote: »

If you are on track for being a senile 75 then that may well be right for you. However, many 75 year olds would not think the same way as you.

Also, the OP has already said that it is a cautious fund. That indicates a limited equity exposure and you yourself had said you would still hold equities at that age.

You dont have to be senile to suppose that at age 75 you probably dont have many years left to go. In fact the senile ones are probably running their finances at 75 like they were half their age.

I will indeed have equities at age 75, but surely not 75% of my wealth and surely not in funds that probably carry high initial charges.

lisyloo

I suspect that most 75 year olds would consider themselves risk-averse also

You are probably right and it looks like this was invested cautiously.
There is still no evidence so far to say it was mis-sold (although we couldn't say it wasn't either).

Unless of course they imagine that they are going to live forever.

Some may be confident that they will live til their 90's if that's their family history.
Its is certainly not the case that ALL investing is out of question at 75 especially if they are the type of investment where there is no capital loss and no exit penalties.

You dont have to be senile to suppose that at age 75 you probably dont have many years left to go.

That doesn't mean ALL investments are unsuitable at that age.

I will indeed have equities at age 75

Thus proving what I've just said.

but surely not 75% of my wealth and surely not in funds that probably carry high initial charges.

1. We have no idea what income she had.
2. We have no idea what see told the advisor about how much she had, perhaps she forgot and told them she had much more. That's why the "fact find" would be required before coming to any judgment.
3. There is no evidence of high initial charges. You are the only one that's mentioned it on the thread i.e. it's just something you made up. Hopefully the case will be judged on the facts and not on things that strangers make up on threads because it's suits their opinion.

My opinion is the same as dunstonh.
No-one can judge until the fact find is obtained, but there is nothing at this stage that stands out as mis-selling.

dubsun

Thanks for all the answers, I think I need to wait to see the Fact Find before coming to any judgement.

To answer a few questions though.

I do know that there was an initial charge of 4.5%, then annual charges of 1.35% of the trust value for management costs and any underlying investment will also have an annual management charge of 0.45%

I also know that she had recently lost both her husband and sister and had never dealt with finances before the loss of her husband.

I believe the current investment is worth about the same as her initial investment in 2006.

Is it worth finding out exactly how the cautious fund is invested, i.e. what % is invested in what.?

I appreciate all the feedback.

jimjames

fairleads wrote: »

What is the current value of the investment?

Good question. If it is more than would have been received in the bank deposit account would the mother really want to be compensated back to where she would have been originally ie a lot worse off?

jimjames

RetiredInThailand wrote: »

I will indeed have equities at age 75, but surely not 75% of my wealth and surely not in funds that probably carry high initial charges.

Initial charges don't seem that relevant to her age. Once paid that is it, hence the name "initial" charge, ongoing charges could have more effect on the income although personally I would avoid paying any initial charges at all.

With the current interest rate and likelihood of it continuing I think there is a case for higher equity percentages than many people have. In many instances it is the income that is more important than the capital value at any specific point in time.

ses6jwg

how has the fund performed since 2006

RetiredInThailand

dubsun wrote: »

I do know that there was an initial charge of 4.5%, then annual charges of 1.35% of the trust value for management costs and any underlying investment will also have an annual management charge of 0.45%

I've read enough. As far as I'm concerned whoever sold this to a 75 year old as a low-risk short-term investment should be strung up.

I'm sure that others will be along to explain why the advisor had the old lady's best interests at heart, and wasn't just thinking about the commission cheque.

RetiredInThailand

jimjames wrote: »

Initial charges don't seem that relevant to her age. Once paid that is it, hence the name "initial" charge, ongoing charges could have more effect on the income although personally I would avoid paying any initial charges at all.

I think age is very relevant. Someone aged 30 buying units to hold for 30 years can worry less about initial charges than someone who just intends holding the units for a few years. And like it or not, anyone buying units at age 75 is unlikely to still own them 30 years later. Buy those units today and sell them next year because your health has taken a turn for the worse and you fancy a holiday before you die, and you probably wont even get your initial investment back.

My personal preference is also to avoid anything that has high fees, especially if this is combined with being "low-risk". I dont need to pay high fees to anyone to manage a low-risk investment for me.

Personally I would have recommended mostly cash deposits (or similar) with perhaps some cheap trackers for this elderly person, but of course those wouldn't earn anyone a huge commission.

RetiredInThailand

lisyloo wrote: »

3. There is no evidence of high initial charges. You are the only one that's mentioned it on the thread i.e. it's just something you made up. Hopefully the case will be judged on the facts and not on things that strangers make up on threads because it's suits their opinion.

Am I the only one who isn't at all surprised to learn that this investment, recommended by an advisor, did come with very high fees?

It seemed pretty likely to me and I would have been surprised had it turned out otherwise. I also dont need proof to know that that cold-callers sell things that probably aren't worth buying, or that Tuesday usually follows Monday.

pqrdef

dunstonh wrote: »

You would typically use a portfolio fund in this scenario which is diverse and self balancing. The OP says it is a cautious managed fund. So, that appears to have happened.

I take your point that this was 2006, when the old assumptions were still largely unquestioned.

But enough storm clouds gathered in 2007 to suggest that the markets were no longer for the buy-it-and-forget-it investor, but only for the vigilant.

My question is, to what extent is the investor responsible for keeping the investment under review, rather than just relying on the fund manager?