GEB's - are they all bad? 30 April 2007 at 8:31AM in Savings & investments 6 replies 870 views

betlarge

I cannot find anyone with a good word to say about GEB's, and some of the criticism of them has been vehement on previous posts on MSE.

Can they be any good under any circumstances?

dunstonh

Yes. I remember a tranche that was available in 1995/6 which was quite good. That was the last time I used one. However, that one was a slightly different one which paid an income net at 6% in year one rising at 1% a year to 10% in the final year and just needed the FTSE to be the same or higher on maturity. Which it just was. With interest rates what they were, year 1 wasnt attractive but interest rates fell back and this one went up each year.

The current batch just dont offer anything of interest and take too much away from you to make them worthwhile.

The hidden charges, tracking once of the worst indices in the western world and putting all your eggs in one basket are just too much.

Low risk portfolio's built 5 years ago are up 60%. A GEB taken at that time would be up about 8%. In that time, the worst loss suffered on the portfolio in any period was just 5% (although it was between statements so the client never saw it. He saw a worst position of minus 0.9%).

The GEBs cater for the individual who thinks that all investing is high risk and doesnt realise that you can invest quite cautiously without needing to jump in at the deep end. i.e. risk on/risk off. Not the sliding scale of risk that we talk about here.

It's better to decide how much risk you want to take and one simple question can be how much of a loss would you accept in any 12 month period? Not many people will say zero. Even the cautious may say 10-15%. The adventurous may say 30-40%.

Risk is important because take FTSE all share trackers, they dropped 40% in a single year in 2002/3. How many people investing in those today realise they have an investment that could lose them nearly half their money in 12 months?

From an adviser point of view, the FSA has reported that most complaints deal with people investing outside of their risk profile. This is both above and below. (there have been complaints to the FOS from people with GEBs complaining that they havent made any money). Matching the investment to your risk profile is vital. You shouldnt go above or below that risk (when portfolio is averaged out) otherwise you will end up disappointed.

Primrose

No, I wouldn't touch another one with a barge pole. I opted for a 5 year GEB TOISA with Bristol & West and in retrospect I must have needed sectioning, because the end result was based on about three different stock market indices and it was impossible to keep a running check on what it was worth at any given time. It matured last year, and I got back exactly what I'd paid in five years previously. Most of the products are not at all transparent and in my opinion, if I wanted another risk investment I'd opt for straightforward unit trusts, or a plain savings deposit account.

barak

Primrose wrote: »

No, I wouldn't touch another one with a barge pole.....It matured last year, and I got back exactly what I'd paid in five years previously. Most of the products are not at all transparent and in my opinion, if I wanted another risk investment I'd opt for straightforward unit trusts, or a plain savings deposit account.

Absolutely right Primrose! I never have bought one and never will. I'm pretty sure that 90% of people who are sold these products don't have a clue what they are buying.

dunstonh may disagree, as he did when I - like you - referred to a barge pole some time ago.

dunstonh

I'm pretty sure that 90% of people who are sold these products don't have a clue what they are buying.

I agree. It may be fair that 90% of those selling them dont understand them either considering that most are sold by the banks.

dunstonh may disagree, as he did when I - like you - referred to a barge pole some time ago.

I have been one of the most vocal here against them. They are an awful product that plays on a few very attractive phrases to make them sound good. They are designed to be sold by low skilled salesforce advisers to low knowledge consumers.

Ian_W

dunstonh wrote: »

They are designed to be sold by low skilled salesforce advisers to low knowledge consumers.

And very good at their job they are too - IYKWIM

barak

dunstonh wrote: »

I agree. I may be fair that 90% of those selling them dont understand them either considering that most are sold by the banks.

I have been one of the most vocal here against them. They are an awful product that plays on a few very attractive phrases to make them sound good. They are designed to be sold by low skilled salesforce advisers to low knowledge consumers.

Fair enough - apologies if I confused your contributions to two different threads.