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

dunstonh

Thrugelmir said:

Dulce-ridentem said:

re was she worse off - by my calcs, between seventy and a hundred thousand pounds. That's using NSI - variation is whether it is all in growth or half in growth and half income. 

Using hindsight I'd be a multi millionaire now if I had done things differently over the years. 

I am still pretty gobsmacked she ended up in a loss position after 12 years of investing even if she picked a pretty unfortunate point to invest.   Unless she drew more than has initially been found (such as the natural yield going out)

@Dulce-ridentem can you list the funds she held?

sevenhills

Dulce-ridentem said:

My point is that she didn't need to use this investment for income at all since she already had cash investments. I would expect the IFA to make it clear to her that it would be more cost-effective to leave the investment to grow and use the cash investments for income. 

For all you know, the IFA did make it clear, but as you seem to be painting this old woman as having no common sense, it's likely that she just did whatever was convenient.

NeilCr

In terms of ambulance chasing when I was in a similar position the solicitor (from a very reputable firm) dealing with the estate asked if I would like financial advice. As it was new and scary to me I said yes - and she introduced me to an IFA who they recommended on such occasions

Could something similar have happened?

Thrugelmir

dunstonh said:

Thrugelmir said:

Dulce-ridentem said:

re was she worse off - by my calcs, between seventy and a hundred thousand pounds. That's using NSI - variation is whether it is all in growth or half in growth and half income. 

Using hindsight I'd be a multi millionaire now if I had done things differently over the years. 

I am still pretty gobsmacked she ended up in a loss position after 12 years of investing even if she picked a pretty unfortunate point to invest.   Unless she drew more than has initially been found (such as the natural yield going out)

Timing perhaps. Invested 2007. Then suffered the fall out of the GFC. The worst possible period of time to be cashing investments in. As the lost capital can never ever be recovered. 

dunstonh

Thrugelmir said:

dunstonh said:

Thrugelmir said:

Dulce-ridentem said:

re was she worse off - by my calcs, between seventy and a hundred thousand pounds. That's using NSI - variation is whether it is all in growth or half in growth and half income. 

Using hindsight I'd be a multi millionaire now if I had done things differently over the years. 

I am still pretty gobsmacked she ended up in a loss position after 12 years of investing even if she picked a pretty unfortunate point to invest.   Unless she drew more than has initially been found (such as the natural yield going out)

Timing perhaps. Invested 2007. Then suffered the fall out of the GFC. The worst possible period of time to be cashing investments in. As the lost capital can never ever be recovered. 

Even so, there must be more to it than that.   The withdrawals stopped at some point.  Although it appears natural yield may have been paid out (which would make a big difference).    If the withdrawals had continued and been a high amount to begin with, then a loss would be expected on a low risk spread.  But as they stopped not long after starting, it seems strange there was not a recovery

I just did a 1st May 2007 to now and using the 20-60% sector average (so pretty dull level of returns).    Growth only would have turned £300k into over £500k.  Whereas £1250pm drawn for the whole period would have turned it into £212,861 but would have had virtually that amount paid out in withdrawals.

The end date is unknown but it still seems to be very low.  Especially when comparing with NS&I which was paying virtually nothing from the end of 2008.

GeordieGeorge

ZingPowZing said:

GeordieGeorge said:

ZingPowZing said:

When you say "no evidence" NeilCr, I have said upthread there will be no evidence of wrongdoing without resort to a Subject Access Request. 

The evidence of 2.2% compound over the last thirteen years on a mid-risk portfolio suggests either the IFA couldn't find the couch in your living room or doesn't give a fig.

What return would you expect given the pace of withdrawals and the client’s risk appetite?

The investment ran alongside QE, and given the clear and predictable effect of QE on markets for over a decade; double the return seems a reasonable expectation. Five year performance of VLS40 and VLS60 is 40% and 50%, and that seems a good benchmark.
For someone invested 100% in stocks over this period, where the winners have been front and centre of attention, you'd expect up to a million.

You’ve ignored the timing of withdrawals, and why the five year horizon?

Thrugelmir

dunstonh said:

Thrugelmir said:

dunstonh said:

Thrugelmir said:

Dulce-ridentem said:

re was she worse off - by my calcs, between seventy and a hundred thousand pounds. That's using NSI - variation is whether it is all in growth or half in growth and half income. 

Using hindsight I'd be a multi millionaire now if I had done things differently over the years. 

I am still pretty gobsmacked she ended up in a loss position after 12 years of investing even if she picked a pretty unfortunate point to invest.   Unless she drew more than has initially been found (such as the natural yield going out)

Timing perhaps. Invested 2007. Then suffered the fall out of the GFC. The worst possible period of time to be cashing investments in. As the lost capital can never ever be recovered. 

Even so, there must be more to it than that.   

The actual timing that events occurred is critical to the outcome along with the sums involved. Markets on a daily basis can swing markedly.  Monthly, quarterly data points don't tell the entire story when looking back with hindsight. Heavy weighting to financials which at the time would have been considered perfectly acceptable. Would have caught many investment managers off guard. 

theoretica

Dulce-ridentem said:

I do not agree that the fact someone died years later than expected proves  the advice did not need to take into account a short life expectancy. 

Given her cash and expenditure levels, and especially that you say she would not have said she was concerned about leaving inheritance, I wonder.  Any, or no, financial handling would have been adequate to cover her spending for a short life - so it makes some sense to have planned for a long one.

[Deleted User]

GeordieGeorge said:

ZingPowZing said:

GeordieGeorge said:

ZingPowZing said:

When you say "no evidence" NeilCr, I have said upthread there will be no evidence of wrongdoing without resort to a Subject Access Request. 

The evidence of 2.2% compound over the last thirteen years on a mid-risk portfolio suggests either the IFA couldn't find the couch in your living room or doesn't give a fig.

What return would you expect given the pace of withdrawals and the client’s risk appetite?

The investment ran alongside QE, and given the clear and predictable effect of QE on markets for over a decade; double the return seems a reasonable expectation. Five year performance of VLS40 and VLS60 is 40% and 50%, and that seems a good benchmark.
For someone invested 100% in stocks over this period, where the winners have been front and centre of attention, you'd expect up to a million.

You’ve ignored the timing of withdrawals, and why the five year horizon?

Timing of withdrawals (1k a  month first two years - zero next three and a half years - 8000pa thereafter) would have made only a marginal difference to the average 2.2% return.

Why five years? Laziness. The VLS charts I looked at only go back five years but are remarkably consistent with the story of the five years before that -  VLS40 and VLS60 appear to be up c 95% and 125% since inception in 2011.

I know VLS weren't around when in '07 and "norms were much different then" etc etc...that just makes the stewardship of this fortune worse for me. If there is one person who should have been conscious of changing times, it was the IFA.

Thrugelmir

ZingPowZing said:

GeordieGeorge said:

ZingPowZing said:

GeordieGeorge said:

ZingPowZing said:

When you say "no evidence" NeilCr, I have said upthread there will be no evidence of wrongdoing without resort to a Subject Access Request. 

The evidence of 2.2% compound over the last thirteen years on a mid-risk portfolio suggests either the IFA couldn't find the couch in your living room or doesn't give a fig.

What return would you expect given the pace of withdrawals and the client’s risk appetite?

The investment ran alongside QE, and given the clear and predictable effect of QE on markets for over a decade; double the return seems a reasonable expectation. Five year performance of VLS40 and VLS60 is 40% and 50%, and that seems a good benchmark.
For someone invested 100% in stocks over this period, where the winners have been front and centre of attention, you'd expect up to a million.

You’ve ignored the timing of withdrawals, and why the five year horizon?

Why five years? Laziness. The VLS charts I looked at only go back five years but are remarkably consistent with the story of the five years before that -  VLS40 and VLS60 appear to be up c 95% and 125% since inception in 2011.

FTSE All Share peaked in May 2007 and didn't recover to the same level until May 2013. S&P 500 followed a similar trend.  The recent longest bull market in history is making people feel complacent. Hardly surprising that VLS looks attractive. As it's yet to face a true bear market.