Investment/customer service

camperdown9

Hi

At the end of last year I was given a gift of £100K. I didn't want to spend the money and really just wanted to put it away for a rainy day and pretty much not think about it. At the time I was banking with Natwest so I went to see them, just for advise as to what to do with this money. The first person I spoke with suggested a one (or it might of been two) year bond paying something like 1%. He did however say that I should speak with their Private Banking team and they might have other options. When I spoke with the private banking team they explained about the benefits of the black account and that it comes with a £24 per month fee. They suggested that I "could*" earn much more than 1% if I invested the money and that they could arrange investment advise, if I became a Natwest Black account customer.

I have a house in France and have in the past found it difficult to manage my french bank account from the UK. HSBC offer a service where they help you set up accounts with HSBC in other countries. Plus you can check balances and move money between HSBC accounts in various countries easily. So I went to see them to get advise with regards to the 100K. They also suggested rather than having a one or two year bond that I should look at investing. Again I was told there is no guarantee that I would make money, but I "should" get the cost of the investment advise and inflation back. As they don't charge a monthly fee and thinking about banking in France it seams to be the way to go.

They suggested that I went with a mix of a stock/shares ISA and an investment package. They charged £1261 for the advice and I invested £97K. I know that investing is a long term commitment and that short term really means 5 years. However after 6 months I am yet to make a penny! In fact last week the investment value went down by nearly £1300.

On top of this just to make me even more unhappy I asked my HSBC premier manager a question and 9 weeks on I still don't have an answer. He keeps delaying answer it. Currently he doesn't want to answer by email or phone he's going to wright to me.


Am I expecting too much?
Or should I look at cutting my losses and go elsewhere?

Alex

sorcerer

DO you know what you are invested in? Did he tell you that you could lose your capital if your investments went against you?


How would this make you feel? Did they ask about the kind of risk you are willing to take?

Totton

Although I would balk at paying that fee it does not look particularly expensive for paid advice. Whilst individual holdings have gone up, this year to date did have the sell-off a few months back since when things haven't moved much, hence a mix of holdings are likely to have remained flat or even fallen.

Without seeing the holdings it is hard to judge but you probably need to give it more time before wasting that £1k on advice by selling up. Do you have a portfolio review date set with the adviser, if not then you probably should have unless you are going to manage your own investments.

Nixter

I know it sucks when you see an investment fall in value. It's never a nice feeling, but unfortunately that is the nature of a stocks & shares portfolio. They are volatile: one day they go up, the other day they go down.

However, what I do in these situations is make a mental check list:
1) Do I believe that this is an investment worth keeping? Yes.
2) Do I need the money now or in the near future? No.
3) Do I have any spare cash to average down? Yes.

Looking at it this way, I'm actually happy whenever the price drops because I can then buy more units at a cheaper price. I see it as a summer sale. Why pay more when you can pay less?

However, you should really look into a more DIY approach in the future as it would save you a lot in fees.

Furhermore, instead of investing 100k in one go, you could have invested 10k over 10 a month period which would have given you a less bumpy ride.

camperdown9

Hi Guys

Thanks for all your replies. I will try and answer what you have asked me.

When I told the bank that I was getting 100k it was their suggestion of the split between the ISA and the investment, using the total amount. At no point did they suggest that as a first time investor that I maybe should invest less. I don't really understand why I have an ISA as I have no taxable income. (I don't have a job or receive a pension)

No I don't know what I have invested in. I was asked if there was anything that I did not want to invest in. From memory they said that as they were looking after the investment they would make the best choices that they could.

They asked me a lot of questions with regards to the type of risk I wanted to take. Their computer scoring system suggested that I was willing to take more of a risk that I actually did.

Yes I was totally made aware that the investment could be worth less than I paid in. However they strongly suggested that it would earn the fees back and that it would also do better than inflation.

I did have one very strange telephone call where they asked me about my partners will, death in service benefit, his pension and also did we have any agreement if our marriage ended in divorce.

I know that its long term, but not sure that I trust them. I am just wondering if I would iof been better of at natwest with a one year bond and some sort of investment with a smaller amount. Maybe waiting on the investment getting to the break even point and just moving on.

Alex

Drp8713

Investing will certainly be better than a savings account in the long term.

You need to give it time, you cant judge it after 6 months.

You hear people say 'my investment has done badly, i lost money' but that is not always the case, eg. The US markets crash by 25%, you have a actively managed US fund with the US market as its benchmark, it only falls by 22%. Your investment is down 22%, yet is performing 3% better than the market, so is a well performing investment despite the market downturn,

The markets go up and down but over the long term if you leave it alone it will be fine, hopefully they are moving your unwrapped investments into your ISA each April.

bowlhead99

Well, as you mentioned in your first post, in the world of investments even 5 years is short term and anything can happen in the short term, and you're only a tenth of the way through the short term! So whether you were being a percent or so up, or a percent or so down (£1300), is completely irrelevant to what it will be worth in 10 years time, and there's no reason to 'cut your losses'.

Without us knowing what it is your fund is invested in it's difficult to comment - but generally if you are invested in something linked in some way to the performance of the stock market or individual companies traded on it, you have an element of protection against inflation in the longer term because companies' values increase over time as their incomes go up with price rises and they pay dividends out to their investors in addition to people wanting to pay more and more for their shares.

Whereas if you just buy a 1 year deposit bond at 1.5% when inflation is 2% you are guaranteed to lose money in real terms and at the end of the year you are just sitting there thinking, "right, I still don't have any use for this money so I might as well stick it in a 1 year deposit again". That is no way to generate a return over the longer term. So, if getting some sort of a real return over the longer term is something you want, investing in a market linked product that bobbles up or down in value (even if it moves 5% up or down every single month) is a better solution than sitting in cash, as long as you can afford to leave it alone and don't need it back in the next few years (five to ten plus).

When I told the bank that I was getting 100k it was their suggestion of the split between the ISA and the investment, using the total amount. At no point did they suggest that as a first time investor that I maybe should invest less. I don't really understand why I have an ISA as I have no taxable income. (I don't have a job or receive a pension)

You mentioned you don't see why you had an ISA as you don't pay tax. Well typically it doesn't cost hardly anything to wrap your assets up in an ISA and given the government gives us £x per tax year of allowance to squirrel away money into an ISA wrapper every year, it makes sense to invest however much money will fit in the ISA, into one and then only the balance above that amount has to sit around generating potentially taxable income.

You say you don't have any salary or pension, but presumably at some point in the future you will either get a job or get benefits or a pension or get a decent amount of investment income, and will therefore need to pay tax on some of your returns. Maybe all your household income and savings are in your partners name at the moment (which sounds like bad planning if that's the case, because you are wasting your annual income tax allowance), but if the partner were to die then surely you would need some income in your own name from somewhere, and be paying taxes, and therefore it would be good that £x of your investment returns were wrapped up in an ISA and growing tax free.

Maybe waiting on the investment getting to the break even point and just moving on.

Well, that's one option, but foolish because the investment itself does not know or care what your break even point is. So the £97k that it was once worth, pre fees, is completely arbitrary. As you mentioned, you were made aware that it could lose money but generally make a decent return after fees and inflation in the longer term.

Conceivably it could go down to £70k or less before recovering back to £200k. It might be £80k next year, only get back to £97 in five years time and get to £200k or £300k a number of years later. Of course, we are only speculating because other than telling us its an investment selected by the manager to fit your risk profile, we don't know what it is. But basically if you have decided you don't want it for the longer term, there is no point holding a risky asset from £96k with a plan to jump off at £97-98k which could come in six months or six years. Either it is right for you, and you should keep it to do its work beyond the breakeven point, or it is not right for you, and you should sell out of it now. Hanging on to some arbitrary 'break even' point is a nonsense.

An anecdote: a relative of mine made his first stockmarket investment ever in 1999, throwing his and wife's annual ISA allowance into a US investment fund right before the dot-com, 9/11, Enron crash. After two or three years it had lost more than half, I think.

He had liked the first couple of months of growth very much, but had not been prepared for the losses that followed - they could have had a new (second hand) car for what they had lost on paper - and it really put him off investing. He didn't put any more in in 2001, 2002, 2003 when markets got super cheap. Or any time after for more than a decade despite having an overflow of cash from inheritances as he reached retirement - everything had to go in 'safe' cash deposits as he avoided the stock market. He kept the US fund without buying a UK fund and a European fund and a Japan fund or anything else to complement it and make it a more balanced and reasonable overall portfolio. He just sat on the fund because he could see that it started to rise, slowly, and he thought it owed him his money back - which he would get if he left it long enough - and then he could quit.

So, by 2013 it finally recovered back to its start price having recovered a good chunk and then getting hammered again in the 2008 credit crunch. It's a fund that has underperformed in its sector (i.e. compared to other managers' north american funds) and has high annual fees which suck up the return in the good years and the bad. He shouldn't have it, because his invested money should not be in one niche sector and even if for some bizarre reason all his money wanted to be in US stocks there are other managers or cheap index funds doing it better and cheaper. But he kept it, because it was not yet at break even.

Now it's over break even, I can't convince him to sell it because it went up by over 10% last year - it's 'had a good run' and he wants to wait and see. Obviously if something more than halves in value, it has to more than double to get back. And as it did more than double, it shows it has potential. So he'll keep it. Even though it is an underperforming fund in only one sector of the world's economy. Not selling it at the bottom of the crash was sensible and I agreed with that bit. But in later years, refusing to exchange it for a more balanced investment, a cheaper investment, an investment from someone with a better track record - just until he 'broke even', was a garbage rationale. Decisions made by human psychology rather than by logic and reason.

Sorry for going off on a bit of a tangent but the point is, don't let psychology make snap decisions for you, and don't hold on to something until it meets some arbitrary target you set in your head. If you have paid for advice and ongoing investment management for a suitable long term investment, which isn't supposed to show a positive return after 6 months, and you have not got a positive return after 6 months, it seems a bit foolish to throw away your fees and start again somewhere else.

If you would genuinely sell it next month if it had recovered £1300, because you don't like being in a risky investment that you don't understand, sell it today and forget about the start price. If you would keep it next month if it had fallen another £1300 because you want to see if it can perform to its long term expectations, forget about the start price. Either way, the start price should not drive your decisions.

But if your real problem is you don't understand what you have invested in, you should probably get another meeting with your salesman who took you through the risk process and try to get them to explain why they think it is better for you than putting much more in cash and less in this particular investment.

Finally you mention not having a job or a pension, and having a partner. So presumably your finances are tied to your partner's. What does he think?

camperdown9

Thanks everyone.

Bowlhead99 = My partner thinks that I should of been told not to invest all the money and that the investment is really not doing well. However he also thinks that I just need to stick with it for now.

As I said thanks everyone.


Alex

colsten

What is your money invested in?