How to complain about a poor performing Shares ISA

gilster

Advice needed!

My parents took out two Share ISA's in 2000. Their total investment was £20k and current value is £6k! The majority of the losses occurred during the first two years.

When the products were originally sold, I do not believe the risks were clearly explained, nor the products suitability. Additionally, the financial advisor quotes in their initial correspondence that they will make contact to undertake periodic reviews and they have never done this.

My dad has contacted th financial advisor who has said they have no right to complain as he should have contacted them when the value started falling back in 2001.

So my question is.....what is the best way to make a complaint and get a successful outcome (hopefully compensation towards the lost funds)?

My dad wants to use a no win no fee firm (probably because he sees it as the easiest way) but I doubt this is the best approach.

What would you recommend?

Many thanks

McKneff

Shares go up and down, your father will have been told that.
And it will have been in something he signed.
Im sure more experts will be coming along to help but I wouldnt hold your breath about getting something back to be honest.

dunstonh

Their total investment was £20k and current value is £6k! The majority of the losses occurred during the first two years.

If it was equity based, then that is in the period of the dot.com crash, US accountancy scandals and Sept 11th. Markets fell around 43% over that period. They recovered over the following 6 years.

My dad has contacted th financial advisor who has said they have no right to complain as he should have contacted them when the value started falling back in 2001.

They can complain about anything they like. However, if the complaint is about poor performance then the adviser can reject that as they have no control over performance.

Looking at typical documents issued in 2000, they would have had a report issued which verified the level of risk they were willing to take. What does that report say?

What investments were used? (so we can look at the sort of risk level)

The drop is bigger than you would expect on conventional investments (indeed, break even would be likely figure or small growth). So, have their been any withdrawals? (this includes the dividends paying out to your parents instead of being reinvested or a regular income from the investment?

Apart from this investment, what other savings did your parents have? (this is important)

My dad wants to use a no win no fee firm (probably because he sees it as the easiest way) but I doubt this is the best approach.

Claims companies are no experts on invesmtent issues. They will put in a one-size-fits-all template letter often containing false reasons which if proven to be wrong by the firm, will actually harm the complaint and reduce the chances of success.

What needs to be done is identify that actually has gone wrong, if anything. At the moment, you havent shown any reason for complaint. There could be but nothing to indicate one yet.

The scale of the drop makes me suspect that there may have been withdrawals (either periodic lump sum withdrawals, payment of dividends out to your parents or a periodic regular withdrawal). Can you check on this as again, this is important. e.g. if your parents had a regular withdrawal of £1000 a year then they have had £12,000 back of their money. So, the £6000 doesnt look bad. If there is no money paid back then £6000 looks bad and doesnt actually fit in with the performance of many asset classes. Once you tell us the investments held that may be explained as well.

gilster

Really interesting information so far, thanks.

They have made no withdrawals and have been paid no dividends.

Like you, I also thought he would have signed something about level of risk but he does not believe he did. He is meticulous about keeping correspondence and the only letter he ever received from the IFA was one that he still has stating 'their normal procedure is to arrange periodic reviews', which they have not done.

They do have other savings although not got the details but can find out. How is this relevant?

If it helps, the two funds are:

Aberdeen European Technology Unit Trust

Invesco GT European Growth Fund

Gill

dunstonh

Like you, I also thought he would have signed something about level of risk but he does not believe he did.

the typical process is completion of a factfind. Often these are completed in discussion style and may not be obvious to the individual that the details are being recorded formally. Risk profiling today is more advanced than in 2001. Finanally a report would be issued confirming all these things on new investments.

They do have other savings although not got the details but can find out. How is this relevant?

Risk is relative to their overall holdings. Someone investing £20k but with say £100k in cash (after investing) would be relatively lower risk but someone investing £20k with £10k in cash left afterwards would be higher risk. So, the investments are viewed as part of an overall position. Not in isolation.

If it helps, the two funds are:

Aberdeen European Technology Unit Trust

Invesco GT European Growth Fund

First fund is high risk/specialist. Second fund is medium/high risk.

If these are the only investment held then it is bad investing. The first fund would explain the scale of a loss. Tech funds generally lost around 90% of their value from peak when they burst.

If someone was looking to dabble into funds in certain areas it would not be bad advice. If someone was looking to invest for the first time and had no other investments then this would be bad advice as two single sector funds with one in a specialist area is not good investing.

roonaldo

Shares go up and down, surely they know that. It's unfortunate for them they went down. There isn't' really a complaint.

magpiecottage

There MAY be a valid complaint if the fund was inherently unsuitable. However, the last complaint I dealt with of this nature went to FOS and whilst I was still arguing with them about the validity of a timebar the ambulance chaser wrote to FOS and withdrew the complaint citing no prospect of it being upheld.

gilster

At the time. My parents weren't investing any more than they put into ISA's ie the IFA was aware they had a maximum £20k to invest, which was a matured endowment, and they spread the investment across two ISA years. I am not sure exactly how much they have invested and don't want to pry too much, but I do know they aren't cash rich i.e. can't afford to lose £14k towards their pension funds. My dad has been self employed all his life and my mum a housewife, and the IFA was aware of this, having dealt with them for several years.

Should the IFA provide the client with a copy (or summary) of the fact find? There is no evidence of this. Is this relevant?

Does the IFA have an obligation to conduct periodic reviews? ( as they said they would do in their initial correspondence?). Again, is this relevant?

Is there any responsibility on the client to contact the IFA if the balance falls significantly? Again is this relevantnin respect of claiming negligence?

What should my parents do next? (your advice has helped me persaude them not to go through a no win no fee solicitor).

Many thanks again for your continued advice. My parents accept that share values may decrease and this is a risk with this type of invested but this loss is significant and I am not confident the IFA ( who has clained management fees throughout the life of the investment) has acted in their best interest. I accept I may be biased so your views are very welcome and appreciated.


Gill

dunstonh

Should the IFA provide the client with a copy (or summary) of the fact find? There is no evidence of this. Is this relevant?

There is no requirement to supply a copy unless requested.

Does the IFA have an obligation to conduct periodic reviews? ( as they said they would do in their initial correspondence?). Again, is this relevant?

An adviser with a servicing contract should service the individual. However, that means paying for it and its unlikely that an investment of £20k would justify having a servicing contract. If you say a servicing contract costs at least £500 a year, then that equates to a 2.5% hit on the return each year. Usually in these smaller cases no servicing contract is put in place.

Is there any responsibility on the client to contact the IFA if the balance falls significantly? Again is this relevantnin respect of claiming negligence?

Potentially but it depends on timescale. For example, if you invest through the dot.com crash and see losses there but then it recovers over the years and then it drops again with the global recession then a person becomes less credible if they complain then compared to if they had complained on the first drop. By the time the second, third,forth etc big drops come, you should be used to it.

What should my parents do next? (your advice has helped me persaude them not to go through a no win no fee solicitor).

If it is the only investment your parents have and they have limited cash savings (at point of application) then they should consider complaining. If they were heavier in cash or had other investments then the chances of success become slim.

I am not confident the IFA ( who has clained management fees throughout the life of the investment) has acted in their best interest.

With hindsight the funds are not ideal. However, you have to remember that back then you had the newspapers running articles about tech funds and how good they were. The Mail even ran an article that effectively encouraged the retired to come out of corporate bonds (low risk) and go into tech funds. Fashion investing is a dangerous thing but it is very easy to get pulled into it.

I dont doubt the adviser didnt have his clients best interests at heart. For starters, he doenst get management fees. A small trail commission would have been paid which would equate to around £30 a year currently. Had the investment performed better he would have been paid more. So, there is an interest in the value going up and not down.

We also have to consider the times that have changed. Today, greater focus is put on portfolios and sector/asset allocations but back then it was normal to select funds like that to invest in.

We have limited info to consider a judgement but there is potential this could be a mis-sale but at the same time, it wouldnt take a lot of documentation from the IFA to show it wasnt.

gilster

Sorry for delay in respinding. If my fathet wishes to pursue, who is he best contacting? Should he make a formal complaint to the IFA in the first instance?