Aviva Guaranteed Investment Bond: How to complain about mis-selling and bad service?

pandaandpenguin

[FONT=&quot]Hi,
I opened the above at the end of 2009 paying in £100,000. The total bond value was £105,015 in November 2012. However, any withdrawal within the first five years results in penalties, so the cash-in value in November was actually £102,915. To date I would have been better to invest the money in a regular, fairly competitive savings account.

A financial advisor from the Co-operative sold me this bond. Aviva paid the Co-op a one-off commission of over £4000 and continue to provide them with an annual percentage. Clearly my investment is very lucrative to Aviva if not to myself. Aviva deduct a sizeable annual management charge themselves.

My question is how can Aviva justify paying themselves a management charge, supposedly, for analysing the markets, moving my funds around etc. when my money would have done better 'sitting' in a savings account. Do I have any recourse to complain about this?

The Co-op did explain that there were management charges, but not that they were receiving commission from Aviva (if they had I would have gone directly to Aviva). What would be the most appropriate method to complain about this.

Thanks for reading, and for any suggestions you may have[/FONT]

bigadaj

You can complain but bought a product from a salesman, also you can't really complain about penalties in these types of bonds.

These products are rare.y good value, I would cash the bond in and look at investing in either a global tracker fund or something like the vanguard life strategy funds. However these would be riskier so if you are the type to panic then maybe cash would be better for you, though your statement about your returns being bettered ina savings account aren't true anymore sadly.

For a four grand fee you could get quite a bit of advice from an IFA, if you are not confident with investments it may be better for you to review with an IFA for an agreed fee.

dunstonh

I opened the above at the end of 2009 paying in £100,000. The total bond value was £105,015 in November 2012. However, any withdrawal within the first five years results in penalties, so the cash-in value in November was actually £102,915. To date I would have been better to invest the money in a regular, fairly competitive savings account.

You are allowed to draw 5% a year without penalty in the first 5 years. The surrender value does not reflect any guarantee value that may exist under the inflation proofing (if you have that option).

It may have passed you by but the last 5 years have not been great for investments. The FSA does not allow complaints about investment returns.

A financial advisor from the Co-operative sold me this bond. Aviva paid the Co-op a one-off commission of over £4000 and continue to provide them with an annual percentage. Clearly my investment is very lucrative to Aviva if not to myself. Aviva deduct a sizeable annual management charge themselves.

Aviva deduct 1% p.a. and that is not sizeable. Indeed, it is less than the net interest margin on a savings account.

My question is how can Aviva justify paying themselves a management charge, supposedly, for analysing the markets, moving my funds around etc. when my money would have done better 'sitting' in a savings account. Do I have any recourse to complain about this?

They can justify it easily. You cannot complain about investment returns as they are always unknown.

The only thing you can complain about is the advice. You used a tied sales force so you would not expect best advice. They issued Aviva products. However, the advice doesnt seem bad as it appears you dont understand investing and this product is geared more towards that sort of person.

I would disagree with bigadaj. Whilst I would prefer the some of the things he mentions (as would many others), they are not suitable for people who cannot understand even the very basics of investments. All those options would have seen periods of capital loss. The Aviva product had a capital guarantee on year 5 and 10 and wherever there is a guarantee, you are sacrificing the potential for the safety.

jimjames

pandaandpenguin wrote: »

[FONT=&quot]

The Co-op did explain that there were management charges, but not that they were receiving commission from Aviva (if they had I would have gone directly to Aviva). What would be the most appropriate method to complain about this.

Thanks for reading, and for any suggestions you may have[/FONT]

The commission is a huge chunk but I'd imagine somewhere in the sales info there is a declaration about it.

If you have a guarantee on the capital then you shouldn't need to worry about the value at points in between, just wait until the dates that you agreed at the start. What are the values guaranteed at 5 & 10 years?

dunstonh

The commission is a huge chunk but I'd imagine somewhere in the sales info there is a declaration about it.

Fairly obvious on the illustration. A copy is issued at point of sale and followed up in the post with the cancellation rights. So, issued twice.

pandaandpenguin

jimjames wrote: »

The commission is a huge chunk but I'd imagine somewhere in the sales info there is a declaration about it.

If you have a guarantee on the capital then you shouldn't need to worry about the value at points in between, just wait until the dates that you agreed at the start. What are the values guaranteed at 5 & 10 years?

Guaranteed to not lose money. ie £100k back after 5 years.

Thankyou for your replies. I am inclined to leave the money in for another year and then reassess-

bigadaj

Presume that you would Disagree with my comment about spending less than four grand on an ifa then dunstonh?

dunstonh

bigadaj wrote: »

Presume that you would Disagree with my comment about spending less than four grand on an ifa then dunstonh?

No. Given the choice of seeing a sales rep or an IFA then the IFA wins hands down everytime.

My only disagreement with you is that you need to look at the fact that the OP is complaining because a guaranteed, low risk investment hasnt made much in one of the worst investment short term periods for a generation. Can you imagine what the complaint would be like had it been in a higher risk investment without a guarantee and fell in value by 20-40%.

dzug1

pandaandpenguin wrote: »

[FONT=&quot]The Co-op did explain that there were management charges, but not that they were receiving commission from Aviva (if they had I would have gone directly to Aviva). What would be the most appropriate method to complain about this.[/FONT]

It's quite possible that Aviva would effectively have paid that commission to themselves if you'd gone directly. A lot of these products have (or had at that time) a 5% startup fee - which they were prepared to rebate back to intermediaries such as the coop. If you'd been savvy you might have negotiated some of it back to yourself.:)

bigadaj

Dunstonh makes a good point about the ability to withdraw 5% free per Nnum in these investments, that would seem to be the one significant benefit in these schemes. The OP doesn't seem to have taken advantage of this, so missed a real plus point.

The ability to get your original investment back guaranteed is poor value, and as others have pointed. Out before such structured products can be created more efficiently by asset allocation.

Keybiz

Dunstonh is aboslutely correct in his assessment. The product offers a full capital guarantee on the £100K at the 5th year anniversary.

As such, you have have exposure to the markets, up or down, but with capital not at risk at the end of the 5 years, regarless of its value at that time.

Unfortunately, guarantees come at a cost and the annual management fee on this product is significantly higher than most, if not all, capital at risk investments. You pay extra for the certainty and this will undoubtably hinder performance.

Its a case of you can't have your cake and eat it. To me it seems as though you were right to be invested in a guaranteed based product as you do not understand the workings of the market. Albeit, you were sold the product from a limited range offered by the Co-op.