Norwich Union Portfolio Step-down: any good for income for a 63-yr-old?

dunstonh

Ah.So the SW bond does have some respectable choices.

Of course it does. Most bonds do. Perhaps you should have considered that before you bad mouthed them.

In that case why the hell are you suggesting that Wurz move to another bond if he can just switch to decent funds within the one he already has? :mad:

I wasn't suggesting he should move it. I said it is an option to consider. If he can get 108% allocation on a replacement with lower annual management charges and a better fund spread then that 8% covers the 3% get out penalty and gives a 5% surplus.

No wonder the FSA (and the lifecos) are desperate to do something about the advisors, the situation is just hopeless.

I'm sorry you see no logic in making someone money.

jamesd

whoosh, EdInvestor doesn't like investment bonds and always argues against them, regardless of whether they are suitable.

The misleading comment that the income is paid from capital is one example. It's completely correct but it doesn't mention that the income and growth of the investments is added to the bond value in what is effectively a different pot of money. What happens is that the initial capital slowly decreases while the other pot of growth and income capital increases. It's done this way because taking your original capital back is more tax-efficient than taking income or capital growth from the investments.

Preserving capital for inheritance is one of the indicators that an investment bond should be considered and applies in this case.

I do recommend reading the alternative IFA view that EdInvestor linked to earlier. Note that the amounts and circumstances of your mother's situation do match them, with the 100,00 amount being fine due to the low charges being made by this IFA, reducing their effect compared to average charges for 150,000.

So far the IFA seems to be both competitive on price and doing things right, except that no mention has been made of stocks and shares ISA use, which would be less helpful on the inheritance front but better for the investments without that consideration. Ease of administration for your mother may just make it simpler to do it all in one place.

Wurz,

Really you were asking for investment selection advice that the bank employees can't give. Picking better funds within the current product or changing to another product and picking better funds within it would do the job for you. Don't be greatly concerned about your initial drop, it really is the case that a better selection from an IFA who does a good job will give you good returns that will recover it.

Since you're in Colchester, you might usefully consider having a word with New Discovery Financial Services in Lowestoft. I expect that they will do a good job for you on NMA terms, though they would probably have to charge something up-front if you went with the same investment, since they wouldn't get commission on it. They should explain the different costs to you so you'll know ahead of time what to expect. I'm comfortable with the investment selection abilities of David there and that's really what you need most.

dunstonh's post just before this one suggests one possible approach: switch product to one with lower annual charges, use the higher allocation of something like 108% of your investment to get back some of the money and for an NMA adviser the ongoing commission will make the initial investment selection free or fairly inexpensive for you, while the lower ongoing annual management charges in the fund also make you better off. It is worth asking for the costs and benefits of not changing as well, since the current investment options might be good enough to make it worth sticking with it until the end of the penalty. That will depend on what investments are suitable for you as much as anything else. Just don't focus too much on the costs - if the investments aren't good enough in the current place, the better returns from other investments can easily make it worth switching. The difference in investment performance between middle of the road and best is way more than the switching cost. It's also possible that the adviser will tell you that this is simply the wrong product type for your needs, as expressed to them, and suggest something else, telling you why they think it's more suitable.

If you want opinions about what they suggest you could usefully start a discussion in a different topic here so people can give you feedback.

Do note that I'm not an IFA and don't work in the financial service business.

jem16

EdInvestor wrote: »

Ah.So the SW bond does have some respectable choices.In that case why the hell are you suggesting that Wurz move to another bond if he can just switch to decent funds within the one he already has? :mad:

Have you actually read any of the posts? You are so blinkered against investment bonds that it is actually making you blind.

No wonder the FSA (and the lifecos) are desperate to do something about the advisors, the situation is just hopeless.

So you slate the one adviser who has just made a suggestion that would make Wurz better off.

EdInvestor

An article about what's happening in the bond market, which may help wurz understand what has caused the problems on the investment front.

http://business.timesonline.co.uk/tol/business/money/investment/article1942056.ece

Many investors are wrongly told that bond funds are safe when they are not.Bonds are safe if you buy individual ones (that is you DIY) and hold to maturity.But the bonds in bond funds are traded, and so are not safe.For many people small additional return over cash will not be worth the risk.

EdInvestor

Wurz wrote: »

Strewth, looks like I'm in the same boat, looking for monthly income with a better bet than my current provider, Scottish Widows. I get £375 per month but my initial capital of £100k (invested in Jan '04) has dwindled to £94k and still carries a £3k penalty for cashing in before 5 years is up. This "flexible options bond" has lost thousands in just a few months and I'm seriously thinking of getting out before I lose thousands more! I am also considering a complaint to the Financial Ombudsman for poor advice & service from SW's and their owners, Lloyds TSB. Apparently I could get just as much monthly income with the reduced capital from a simple Building Soc bond such as Bradford & Bingley, and of course, no risk to capital - any advise would be welcome!

How can anyone justify selling an investment bond where the capital is wholly invested in fixed interest to an investor who wants to withdraw 4.5% a year?

After charges were taken, what return might have been expected from this investment? Around 3% if you were lucky :mad:It was a racing certainty that this investor's capital would be depleted right from the start, unless he took a much lower level of income.

Did Wurz state that one of his aims was to preserve or grow capital? If so then he should complain about this sale.

dunstonh

How can anyone justify selling an investment bond where the capital is wholly invested in fixed interest to an investor who wants to withdraw 4.5% a year?

TIED AGENT!!!! Tied advice is documented as the client picking the fund. Independent advice is documented as the adviser picking the funds.

Tied agents do not recommend funds. They find out the risk profile and show the funds they have in that risk profile for the individual to pick from. If there is only one fund in that risk profile, that is what they recommend.

Ed, what is more worrying is that the FSA's proposals to downgrade the quality of advice for the mass market will see far more of this happening. I suggest you take a good look at the RDR as I am sure your group needs to understand the current proposals. I know you said IFAs werent happy but I cannot see how any consumer will be happy unless they are higher net worth and seek decent independent advice. The increase in qualifications and standards in what will be the new IFA standard is great. However, the downgrading in advice for the rest will be a disaster for the middle market. Even the FSA have admitted that those in the middle net worth bracket will be worse off as the "new style" IFAs will be fewer in number and dealing with more of the high net worth. There will be more simple advice advisers with more expensive products dealing with the mass market. The medium net worth clients will have to decide whether to pay for a higher quality level of advice or pay in hidden charges for a lower quality level of advice, even lower than what the banks offer at the moment.

So, you think banks are bad now? You wait and see how bad it will become.

jamesd

dunstonh, it does make depressing reading for most customers. A proposal for reduced rights to complain, higher product charges and commissions and flowchart "advice" from bank call center operators that already do a poor job suggests a poor future for their customers.

The high end for fee option looks more interesting but I do wonder who will get it: the current customers of wealth management companies and high net worth individuals, perhaps.

It really looks like a great dumbing down of financial advice for all those of middle to no income in the UK has been proposed.

Coops10

Hi all, I'm relatively new to this site, and whilst I haven't got all day to read through this interesting thread, I have picked out a few points that I would like to comment on.

Having floated around the site for a few weeks, I do recall a comment by EdInvestor stating that Bank Tied Agents have their place because they "are free". Now, those of us in the game will realise that a tied agent from a bank (said with immense authority as I used to do it!) are the most expensive and least flexible of all advisers in the industry, due to the products they recommend, the charge being taken, the limited advice, and sometimes, some downright poor advice given, as they are not qualified to do so.

A couple of things that I have picked up from this thread are as follows:

1. It is proof that Tied Agents in a bank do not have the remit or quality to give sound financial advice - merely just pick a product according to mostly what they can sell. I kid you not.

2. The benefits of a decent IFA, in the long run will ALWAYS far outweigh any benefit of a non transparent fee paying meeting in a bank or with e.g."an insurance salesman".

3. IFA's have the ability to portfolio plan, and any IFA worth his salt will be building in annual reviews to monitor your products, portfolio according to your circumstances. A bank will never see you again once those funds have been invested.

4. Why oh why??? is ths biggest issue to do with commission?? I really don't understand it and Edinvestor seems to have a huge issue with it. Talk to your IFA, discuss his/her worth, and the products being recommended.

5. I do not know dunstonh - but it seems a shame that he comes on here on a very regular basis giving some excellent guidance to people, only to be slated by people purely for being an IFA? If I was him, I'd have given up by now! If you have been stung by poor advice before, which has obviously happened in our industry, why generalise that everyone is the same?

Now, that's all from me. However, if I was the thread owner, I would feel far more secure in the knowledge that the advice given appears good (I'm also a big fan of said bond), and commission etc has been discussed, than I would with the bank's advice of "leave it 6 months", in an area that has had a torrid year.

Wurz

Hi, I'm away from home at the moment, so have no exact details to hand, but my initial conversation with Lloyds was that I was looking for monthly income, what could I get for £100k. The advisor came up with £375 and said any growth in capital would be added to total. First year, minimal growth, 2nd year grew to £106k and then downhill to £94k currently. My criteria was not to endanger capital, and not once have Lloyds/SW's suggested taking less a month-in fact one of their replies was that "your investment has only gone down because you are taking monthly income". I reminded them that the monthly income was the whole purpose of the exercise! Thanks to all who are responding to my queries, I'll recheck and look/reply to any messages Sunday evening!

TBeckett100

Scottish Widows flex bond offers the Cautious Portfolio which is actively managed, certainly steer clear of fixed interest and these havent done well in an equity favoured economy