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

lisyloo

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?

Is this very high for 2006?

High fees do not in themselves mean mis-selling.
For example I'd be prepared to pay higher fees for better advice if it was likely it resulted in higher returns

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

Generally advisors who set up investments are not responsible for keeping them under review.
If you want them kept under review you either pay for that service on an on-going basis (which is what I do) or you go back to the advisor periodically.

I have personally complained about a GEB (guaranteed equity bond) that was sold to parents in their 70s (it made no money as the stock market went down in that period). I am pretty sure my parents did not understand it BUT they had signed to say they had read and understood it, so they didn't win the complaint.
I now manage all the finances for them (now 84).

Unfortunately in the eyes of the law they are mentally competant although I know there is no way my MIL (who has early signs of dimensia) would not be capable even of understanding what the word "investment" means.

My practical advice is to try to keep an eye on their money. I know it can be difficult without full power of attorney as that's the situation I'm in.

dunstonh

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.

MiFID came in at the end 2007 and that changed some things but only for advice going forward.

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

You have two different things here. 1) the adviser. 2) the fund manager.

The fund manager has no responsibility to the individual for advice given. The fund manager has a remit to invest the money in the way published for the rules and objectives of that fund. The fund has it's published rules and the manger follows those.

The adviser can be employed on a transactional basis or a servicing basis. Transactional advisers give one off advice. They are not employed to give ongoing advice. Servicing advisers are employed to give on-going advice. No bank gives servicing advice.

Also, even with servicing advice, the advisers do not have the regulatory permissions to move money around without permission. You need to have discretionary investment management permissions for that and someone with £26k isnt suited for discretionary investment management.

Without knowing the facts and making some assumptions that this person was low knowledge with investments and a lazy investor (ie.. would not review, monitor or rebalance) then you would expect a portfolio fund to be recommended rather than single sector funds. i.e. a fund which is diverse and self balancing (fund manager does it). And of course, it should match the risk profile of the individual and reflect the likely timescale. So,a cautious managed fund would be the sort of thing you would expect to see a retired person have if the advice came from a transactional adviser.

lisyloo

Please keep us updated on what actually happens as there appear to be diverse opinoin on this.
It would help us to make better judgements/advice in future.

I don't like "spurious" complaints as ultimately it costs all of us but if you feel there might be an issue then put in a complaint anyway. I undertsand you want to do the best for you family and might simply not know. There is no cost to you of making a complaint, although it will have to come from the lady concerned. I write letters for my parents and they just sign them.
You will then have it judged properly on the facts, not by some amateurs, some of whom have pre-formed opinions.
In fact initially the complaint will be judged by the company concerned who have a vested interest in declining, but you can then go to the free and independent ombudsman.

dunstonh

Please keep us updated on what actually happens as there appear to be diverse opinoin on this.

At the moment, I suspect that is mostly to do with the fact we dont have the facts. If we did, then often these things are fairly clear one way or the other.

I wouldnt want to call this one either way based on the information supplied as there are potential areas it could be wrong but we dont know what was said and documented to counter those.

margaretclare

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.

Also remember that the OP's friend's mother has already lived 6 years after taking them out. So past the typically recommended minimum of 5 years. You cant complain that she could have died as she didnt. Now, if she wasnt well at 75 and she died say 2 years later then there could be grounds for complaint there. But that did not happen.

i will repeat that I am not saying there are not grounds for complaint. Just that we havent seen anything yet to suggest there is. A couple of things could be with clarification but equally they may not be.

Thanks for this, dunstonh!

RetiredInThailand

lisyloo wrote: »

Is this very high for 2006?

High fees do not in themselves mean mis-selling.
For example I'd be prepared to pay higher fees for better advice if it was likely it resulted in higher returns

I think that is a high price to pay in any year. Especially for a low-risk fund which, by definition, shouldn't be requiring much in the way of management.

pqrdef

dunstonh wrote: »

and making some assumptions that this person was low knowledge with investments and a lazy investor (ie.. would not review, monitor or rebalance) then you would expect a portfolio fund to be recommended

This is what worries me. If that was the conventional wisdom of the financial advice industry, which it probably was, this only suggests that the financial advice industry is too far up its own !!!!. Anybody outside the industry applying some ordinary common sense would have thought that some nice index-linked savings certificates would have been more suitable, and they would have been right.

lisyloo

I think that is a high price to pay in any year.

If that was standard pricing at that time, then it doesn't matter whether you think it's high.
Also it's not mis-selling to pay a higher price that average.
If I buy baked beans for Tescos for 60p and they are in Morrisons for 40p, then I can't claim I've been mis-sold.
EVEN if this is a high price, it would still have to be proven that the investment was unsuitable.
I don't know either way, but a high price (EVEN if that is true) does not make it mis-selling.

You are pre-judging it on few facts.

lisyloo

Anybody outside the industry applying some ordinary common sense would have thought that some nice index-linked savings certificates would have been more suitable, and they would have been right.

I would agree, but you still need more than that for mis-selling.

dunstonh

This is what worries me. If that was the conventional wisdom of the financial advice industry, which it probably was, this only suggests that the financial advice industry is too far up its own !!!!. Anybody outside the industry applying some ordinary common sense would have thought that some nice index-linked savings certificates would have been more suitable, and they would have been right.

Tied agents are not authorised to recommend other products. IFAs recommend NS&I certs by the millions. Also, how do we know the conversation didnt agree to risk based investments as a preference?