What constitutes mis-selling of stock market investments to someone old and naive?

[Deleted User]

dunstonh said:

 The IFA says she had a with-profits bond in 2007 which he cites as experience of stock market investment. For her, the word 'bond' would make it sound the same as she was used to with the building society.

Forget what you think she may have thought 20 years ago.  It is totally irrelevent.
It is also clear that she did have experience with investments for the previous 7 years and 3 of those years were negative as there was a major fall in the markets in that period.

The investment did okish - about 2.2% compounded, giving her 78K in growth and income over the 14 years. 

You have not mentioned the investments but 2.2% p.a. growth plus withdrawals on top is not necessarily a bad outcome for a low risk investment.

The total fees she paid over the period were 53K, of which the advisor received 37K. These fees are higher than average, according to Which? money

Have you a link to the article from Which in 2007 that says that?   Again, forget it if it's a recent article as that will be based on charges when it was written.  Not charges at the point of sale.   Also, 2007 would unlikely to be a fee based investment but a commission-based one.  Commission was not explicit to fees.  Indeed, In 2007, Aviva had an investment bond on a commission basis that could give an IFA 0.5% p.a. and an initial commission and have a negative reduction in yield due to charges for the first 5 years.    The lack of transparency on commissions was one of the reasons they were abolished in 2013.  However, it is all irrelevant.      

Also, most WP funds in an investment bond were around 1% p.a. in 2007.  So, the charges may well not be heavy.   Are you looking at the initial sale illustration that shows the impact of the cost of charges and treating that figure as the amount of charges paid?   That figure is increased with a growth rate and is designed to show the impact rather than the actual charges.  The actual charges would be much lower.  On that illustration, there would be a reduction in yield figure.  That gives you a better indication of the real charge (e.g. a reduction in yield of 1.1% p.a. would indicate a 1.0% annual charge).

And, there are still distribution channels today that have high charges of that level and are allowed to do so.  The fact that the majority are cheaper is irrelevant.

My concern isn't the return, which could have been worse.  I feel she was vulnerable and the IFA took advantage of this.

The problem is that it's all opinion and you saw her once a year or less and that was only in the later years.  

She had 600,000 in savings (inherited when she was already elderly) but her pension was minimal so I believe the IFA who says she wanted an income. 

This is significant new information.  Firstly it confirms that the age allowance would have been wiped out with cash saving and more importantly, it indicates that investing £300k (half) was not at all unreasonable as it left a significant cash float.

My ideal would have been for her to live peacefully somewhere she loved, with no money worries. With her assets that was perfectly possible.

That may be your ideal but it wasn't hers.  She had £300k in investments and £300k in cash.  I doubt many people would consider that scenario as being one that gives money worries.

Have you formally complained to the IFA and/or submitted a Subject Access Request to obtain all relevant details about their dealings?

I believe the GDPR only applies to the living.

 dunstonh. Are you sure about that? Have you the link for that quote, please?

That's not what this says:

 https://ico.org.uk/media/for-organisations/documents/1202/information-about-the-deceased-foi-eir.pdf

There are no specific exemptions under FOIA for information about deceased people.

Being the topline of the summary.

Thrugelmir

Dulce-ridentem said:

Hi @dunstonh -- 2.2% allows for withdrawals -- a bit simplistic but I just added all the withdrawals and the total gain and calculated the interest equivalent.  I could use a more complex model but there are a lot of imponderables and I'm trying to keep it simple but fair. 

Timing of the withdrawls would have a material impact on the outcome. 2007 was shortly before the GFC. With hindsight perhaps not the time to invest a lump sum. That's the downside of investing per se, returns are not guaranteed. 

eskbanker

ZingPowZing said:

dunstonh said:

Have you formally complained to the IFA and/or submitted a Subject Access Request to obtain all relevant details about their dealings?

I believe the GDPR only applies to the living.

 dunstonh. Are you sure about that? Have you the link for that quote, please?

That's not what this says:

 https://ico.org.uk/media/for-organisations/documents/1202/information-about-the-deceased-foi-eir.pdf

There are no specific exemptions under FOIA for information about deceased people.

Being the topline of the summary.

It's https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/what-is-personal-data/what-is-personal-data/#pd6

Your reference is to obligations under the Freedom of Information Act, separate from the Data Protection Act and not applicable to private sector organisations....

dunstonh

I'm looking at the actual money the IFA received -- I have the balance sheet with all outgoings for the whole period.  So I have allowed for the way tax affected things, and also for the rebate she got on some fees by using the wrapper.

Where did you get that information from as that is very unusual on 2007 contracts.  The IFA is not normally paid explicitly on with profit funds. For most 2007 WP funds, the AMC is charged to the client and the IFA is paid out of the AMC.   Not in addition to the AMC.   In 2007 there were some fee friendly contracts available for those of us working that way but they effectively charged the default charge, then rebated the commission within the plan and then deducted the fees explicitly.  So, you would the default charge deducted, then a rebate and then the explicit charge for fee basis.  You must factor the rebates against the charges otherwise it would not get a true figure. It would look like double charging if you didn't include the rebates.

Fair point about commissions etc. That's why I'm here, to get some perspective. She paid an initial fee and then annual fees. Totalling 53K over the period. I've been told there are also fees to close the account.

There are rarely fees to surrender an investment bond.  MVRs are not normally charged on death.  You mention account but there wont be an account with an investment bond.  So, I suspect that is a terminology mix up.    Some platform based investment bonds list them as accounts but they didn't offer WP funds.

Can you name the provider as it would give a better understanding of the contract (unless it's some obscure one). Most of the 2007 investment bonds offering WP funds were using unitised with profits at the same cost as the unit-linked range.  A couple, like Pru by that time, had addons (increasing capital security for example) which came at a cost.   it would also indicate whether it ended up in a closed WP fund or one of the better ones that remained with an open insurer.

Modern investment options are chalk and cheese compared to what was being used in 2000 and 2007.  There were some gems from that era that were very good and still good value today but UT/OEICs, that you are possibly using today had 5% initial charge back then and AMCs that ran above 2% p.a.  Today, the same funds have wiped out the initial charge completely and are typically under 1%.

Dulce-ridentem

 Some more answers..

You're right I'm muddled on terminology, it's years since I paid much attention to these things, although I used to.

The wrapper provider is Transact. I'm doing my best to interpret a spreadsheet with several thousand entries and many labels. It lists  Initial Payments  to the advisor, Initial payments to the Wrapper, Annual payments to the Advisor and Wrapper charges.

The commission when the money went in was 3.4% (9,500) to the advisor plus 0.48%(1,350)  to the wrapper company. Total around 4%

There was a monthly, sometimes quarterly commission taken thereafter. The IFA told me the total annual fee/commission was 2.9% of which he received 1.9% and the rest went to the wrapper and to the fund managers. The wrapper received about 1,000 pa, the IFA about 1400. These figures seem lower than what the IFA stated so I'm a bit confused on that.

It's in a bunch of  normal-sounding funds from big names and with income oriented names - BNY Mellon UK Income, Artemis income fund, Invesco Equity high income fund, Invesco global bond fund, various property funds, Aegon strategic bond etc. The investments seem not to have been adjusted after the initial tranche.

In terms of her experience which someone questioned. It was:

• 1960 - 2000 left it to husband and anyway poor as a rabbit most of the time;
• 2000 husband died
• 2001; IFA made a recommendation which ultimately did not suit her. He earned 5% initial commission  plus ongoing fees. The performance was actually ok as the market was strong at this point, but she was distressed because she couldn't access the fund without penalty - something that should have been explained by the advisor.
• 2007 IFA (possibly the same one) made another recommendation.

I don't see this as experience, just struggling once her husband had gone.

If you deal with elderly people you will know how hard it is both to help them and respect their privacy. I spoke to the IFA as soon as she gave me permission, when I'd become her attorney (weeks before her death). I didn't feel I could before that. She felt it would be rude to question the IFA (after all, he is a *MAN*). It is hard to express how strong that respect for gender was for her.

I know she was lucky to have so much and she shouldn't have worried. We cannot always heal people's fears.

I'm not trying to get more money for the estate - if there is any then it can go to charity, nobody needs it.

I worry about someone with less money and equally ignorant, ending up worse off.

I'd like the IFA to think twice before advising someone vulnerable, and to be scrupulous about it.

I believe concerns should be raised so that processes and behaviour in this industry are improved.

Someone has infered  that I didn't know her well - this is not the case but it's useful because it means if I do complain  I need to emphasis how frequently we communicated by letter and phone, and that I lived with her as a teenager.

Mothman

If the IFA was getting 1.9% ongoing then he was doing very well out of it even for back then. However there do seem to be big discrepencies in your figures as £1400 is nothing like 1.9% of £300k. Also the account balance average would needed to have been around £175k for it to agree with your £53k total IFA charges figure.

theoretica

What I get from your post is that the investing may have been sound numerical advice at the time it was given - but you think it was emotionally wrong for her.  And that seems hard - so much of advice or deciding if something was wrong is numerically based, and so much of life and whether something makes someone happy is emotional.  And sometimes no choice is perfect and every possibility has downsides.

'I'd like the IFA to think twice before advising someone vulnerable, and to be scrupulous about it.'

I suspect he was -but more from the numerical point of view and less from the emotional.

Thrugelmir

Dulce-ridentem said:

Someone has infered  that I didn't know her well - this is not the case but it's useful because it means if I do complain  I need to emphasis how frequently we communicated by letter and phone, and that I lived with her as a teenager.

All of which is totally irrelevant!  

[Deleted User]

eskbanker said:

ZingPowZing said:

dunstonh said:

Have you formally complained to the IFA and/or submitted a Subject Access Request to obtain all relevant details about their dealings?

I believe the GDPR only applies to the living.

 dunstonh. Are you sure about that? Have you the link for that quote, please?

That's not what this says:

 https://ico.org.uk/media/for-organisations/documents/1202/information-about-the-deceased-foi-eir.pdf

There are no specific exemptions under FOIA for information about deceased people.

Being the topline of the summary.

It's https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/what-is-personal-data/what-is-personal-data/#pd6

Your reference is to obligations under the Freedom of Information Act, separate from the Data Protection Act and not applicable to private sector organisations....

eskbanker said:

ZingPowZing said:

dunstonh said:

Have you formally complained to the IFA and/or submitted a Subject Access Request to obtain all relevant details about their dealings?

I believe the GDPR only applies to the living.

 dunstonh. Are you sure about that? Have you the link for that quote, please?

That's not what this says:

 https://ico.org.uk/media/for-organisations/documents/1202/information-about-the-deceased-foi-eir.pdf

There are no specific exemptions under FOIA for information about deceased people.

Being the topline of the summary.

It's https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/what-is-personal-data/what-is-personal-data/#pd6

Your reference is to obligations under the Freedom of Information Act, separate from the Data Protection Act and not applicable to private sector organisations....

Thank you. Unfortunately, then, the OP won't be able to learn from any concerns raised by the deceased to the IFA over the past twelve years. Pity, since the IFA appears to have done exactly nothing in that period, not even rebalancing between funds,  and will likely get off Scot free.

Thanks to the OP for raising the issue; I am sure it may encourage many others with living relatives to check on their situation.  

dunstonh

The wrapper provider is Transact. I'm doing my best to interpret a spreadsheet with several thousand entries and many labels. It lists  Initial Payments  to the advisor, Initial payments to the Wrapper, Annual payments to the Advisor and Wrapper charges.

Transact is a fee based whole of market platform and its charges are not unreasonable or heavy.    It's not the cheapest but for £300k, it was middle of the road value.  For example today  the platform charge is 0.27%.  Hargreaves Lansdown is 0.45% for comparison.   Transact do have a wrapper charge and onshore bonds were £18 a quarter and offshore bonds £60 a quarter.  I'm not aware of a closing charge with Transact and cannot see a reference to one in their charges document.  

You mentioned With Profits and an MVR but Transact doesn't have a WP fund and does not charge an MVR.  

There was a monthly, sometimes quarterly commission taken thereafter. The IFA told me the total annual fee/commission was 2.9% of which he received 1.9% and the rest went to the wrapper and to the fund managers. The wrapper received about 1,000 pa, the IFA about 1400. These figures seem lower than what the IFA stated so I'm a bit confused on that.

I suspect you will find the 2.9% was initial and not annual.   And the annual monetary amount puts the IFA at circa 0.5% which was, and still is, the dominant figure used for ongoing servicing.

I'd like the IFA to think twice before advising someone vulnerable, and to be scrupulous about it.

The fees, based on your latest post are not high (assuming 1.9% initial and 0.5% pa to the adviser).   There would have been rebates applied as well before 2013 (commission paying funds rebating the commission until moved to clean share classes with the RDR). 

I believe concerns should be raised so that processes and behaviour in this industry are improved.

You are referring to a 2007 sale.  This is 2021.  Since then there has been the RDR, FAMR and MiFIDII.  All three of these have had significantly changed advice.   Any complaint would be measured on the rules at the time.    That said, you still haven't given any information that suggests any wrongdoing.     There is some confusion in your figures and details and there is certainly justification for using an investment bond (whether offshore or onshore) as the age allowance existed at the point of sale and bonds are not subject to capital gains tax or personal income tax until surrender and as a low earner, top slicing relief would ensure that no further taxation was likely (unless it was an offshore bond and there may be a tax charge there).

From what you have said, and putting aside any personal views you have, from a technical point of view, there doesn't seem too much wrong with the recommendation.    Transact were a platform that allowed a cash float in the wrapper at that time.   So, its quite possible a cash float did exist.   

The fact she was invested from 2000 and would have seen losses in the early years is experience with investing in terms of knowing that the values will go down as well as up.

If there was wrongdoing then you should absolutely complain.   However, at the moment, I am not seeing it.