Bad Advice. Can I do anything?

Rich1976

masonic said:

Rich1976 said:

So I do feel sorry for the o/p and to be bombarded with what did you expect, didn’t you realise type of questions isn’t helpful. Because no they clearly didn’t expect big losses and no maybe they didn’t realise because if they have no experience of investing how could they know or have expected this.

It something their adviser should have discussed with them before any investment was made. It is not as though losses of this magnitude are unusual - a look at a performance chart for the investments during 2020 probably would have shown the potential for a sharp drop of this magnitude. The bare minimum for someone with no experience of investing to understand before agreeing to make an investment is the loss potential and range of possible outcomes envisaged under different conditions. Most advisers would have a conversation about this with their clients. I think some of the comments can be interpreted as genuine surprise that an investment was made without understanding what the potential returns could be.

It may have been discussed but doesn’t mean the consequences was understood.

until something negative happens as in this case of losing 15% it can be difficult to know how someone will react until they see it in front of them.

london21

You seem clueless.

You need to understand investment and the nature of them, they can go up as well as down.

In the long term might be ok if you are well diversified. 

• "Unlike cash, stock market based investments are not guaranteed and fall in value as well as rise, we therefore believe you should only invest for the long term (5+ years). Ultimately you could get back less than you invest. Any yields will vary over time so income is variable and not guaranteed." https://www.hl.co.uk/important-investment-notes 

Rich1976

london21 said:

You seem clueless.

You need to understand investment and the nature of them, they can go up as well as down.

In the long term might be ok if you are well diversified. 

• "Unlike cash, stock market based investments are not guaranteed and fall in value as well as rise, we therefore believe you should only invest for the long term (5+ years). Ultimately you could get back less than you invest. Any yields will vary over time so income is variable and not guaranteed." https://www.hl.co.uk/important-investment-notes 

Describing someone has clueless isn’t helpful either.

If the other person doesn’t know anything about investments then they are hardly going to understand them. Most people are not interested and just want a better return than cash as I’ve explained in my opinion above.

they were aware from what they’ve said they were aware that investments can go down but they were not expecting big losses like they have. Quoting generic quotes isn’t helpful either because stockmarkets go up and down but the other person wasn’t expecting big losses from a medium risk fund.

Rollinghome

masonic said:

Rich1976 said:

So I do feel sorry for the o/p and to be bombarded with what did you expect, didn’t you realise type of questions isn’t helpful. Because no they clearly didn’t expect big losses and no maybe they didn’t realise because if they have no experience of investing how could they know or have expected this.

It something their adviser should have discussed with them before any investment was made. It is not as though losses of this magnitude are unusual - a look at a performance chart for the investments during 2020 probably would have shown the potential for a sharp drop of this magnitude.

It's a problem the FCA has been considering for years.  Getting rid of commission on new products as a result of RDR has been very successful, but there is still the problem of what I think they termed "transaction bias".  In most cases, the advisor will earn nothing unless there is an investment  - clients are unlikely to welcome a bill for being told to stay as they are in cash.

To be fair, it must have been difficult recently to advise any course to the person who makes clear that they are very averse to risk.  In a year when Vanguard LF 100 has returned  -1.5%, the supposedly low risk LF20 is down -15.5%, and interest rates only recently tottered into whole numbers, it's been tough for investors, or savers, in that situation.

Nebulous2

Rollinghome said:

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

There isn't an easy way out I'm afraid. 

Didn't the adviser discuss the long-term nature of what you were doing, your attitude to risk, and the possibility of fluctuating prices, before you bought? 

Just to be clear. The value of the investment will also have lost a further 10% in real terms too.  It's often very misleadingly suggested on this board that real-terms loss due to inflation magically doesn't apply to equity investments. It does.

To the OP.  That is the nature of investment versus cash savings. The return on investments can never be predicted. All we know is that, historically, equity investments have provided a better return than cash savings over the longer term.  Whether your investments are suitable for you depends on your very specific circumstances, details of which you may not want to put on a public message board.

From the scant details you have given, the advice seems fine, but no one can tell you where your investments will go from here, or when.

I think you may have misread or not understood the bit you have highlighted.  It was projecting forward. You have no idea whether equities will fall behind inflation over the next year or not. Going by the forecasts its very likely that cash will. 

Many investors measure their equity returns net of inflation - and are aiming for a percentage above inflation.  

Precisely. So why did you say "if you are in cash"?   Why "add another 10% loss on top for inflation over the next year if you are in cash" but not for loses on equities.

Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago.  None of us know whether equities will out-perform cash, or under-perform as they have YTD.  We don't know what the interest rate will be over the coming year nor the return on equities.  We do know that returns from any source are always reduced in real-terms by inflation.

Two possible scenarios:- 

He sells his shares and moves to a cash ISA which is what he proposed. I was saying that if he does that he will lose out by the difference between inflation and what he gets on his cash ISA in the next year. 

He keeps his equities. They could go down further, go up but not as much as inflation, break even or exceed inflation. Over the long-term investors expect to beat inflation, that's why they do it. Over the very long-term, with a diversified portfolio they pretty much always have. 

You then responded by saying:-  "The value of the investment will also have lost a further 10% in real terms too" 

You seem to be agreeing that we cannot predict what the stock market will do - but then you told him he will lose 10% in real terms.  

The bit of yours in bold - no it isn't. If you had £100 in cash and £100 in equities a year ago and still have the same today, then yes both have lost. If you now have £102 in cash and £110 in equities, then your equities have held their own. If you have £115 in equities today, your equities have outperformed inflation. 

Nebulous2 said: "I was saying that if he does that he will lose out by the difference between inflation and what he gets on his cash ISA in the next year."

What you actually said was "Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash ".  I would hope that most people would already grasp that if the rate of interest is less than inflation they would "lose out" - just as I hope you now understand that if you get a lower return than inflation than from investments (or a negative return), you will also "lose out".

If so, that's hunky-dory.

I understood that all along. What I actually said was:- 

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

If he sold and moved to a cash ISA he would be compounding the problem by having to deal with rates below inflation for the next year. 

You consulted your crystal ball and claimed that if he lost in cash he would also lose in investments - without knowing what these investments would do. 

"Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago." 

Anyway enough of this, which has distracted from the OPs post. That was a nice post of yours at 4:38 wishing him well. Have a thanks.  He's in a tough place, having taken a drop and worrying about it. 

masonic

Rich1976 said:

masonic said:

Rich1976 said:

So I do feel sorry for the o/p and to be bombarded with what did you expect, didn’t you realise type of questions isn’t helpful. Because no they clearly didn’t expect big losses and no maybe they didn’t realise because if they have no experience of investing how could they know or have expected this.

It something their adviser should have discussed with them before any investment was made. It is not as though losses of this magnitude are unusual - a look at a performance chart for the investments during 2020 probably would have shown the potential for a sharp drop of this magnitude. The bare minimum for someone with no experience of investing to understand before agreeing to make an investment is the loss potential and range of possible outcomes envisaged under different conditions. Most advisers would have a conversation about this with their clients. I think some of the comments can be interpreted as genuine surprise that an investment was made without understanding what the potential returns could be.

It may have been discussed but doesn’t mean the consequences was understood.

until something negative happens as in this case of losing 15% it can be difficult to know how someone will react until they see it in front of them.

It's true, the adviser could have briefed them about what had recently happened to the fund during the pandemic, and when they visualised their £120k turning into £95k over the space of a few weeks as happened then, they didn't realise what it would feel like and thought they'd be ok with it. Whether I feel sympathy for someone in that situation or not is irrelevant, so no need for me to comment.

We haven't yet established whether the OP did have such a discussion, what was disclosed about performance and risk, nor whether there is some reason why the performance over one year is important to them. When the thread is titled "Bad Advice...", those are the root issues that need to be understood if any help is to be offered.

Albermarle

So I do feel sorry for the o/p and to be bombarded with what did you expect, didn’t you realise type of questions isn’t helpful. Because no they clearly didn’t expect big losses and no maybe they didn’t realise because if they have no experience of investing how could they know or have expected this.

The title of the thread and the original post, show that the OP was thinking along the lines of 'I got bad advice and can I claim back the losses' It seems OK to me to explain to the OP that a drop in investments is normal ( if a little painful) and provided they received appropriate advice then there is no comeback. Then to ask questions to try and find out if the advice was appropriate , but so far no real evidence of that it was not. 

As you have also said, I suspect warnings were given but not fully taken on board.

wmb194

The OP didn't notice how quickly the markets tanked when they panicked over Covid in Feb/Mar 2020? It was all anyone was talking about at the time. If they've been savings in cash Isas since they began - 1999 - then they've lived through multiple periods of stock market turmoil.

Rich1976

wmb194 said:

The OP didn't notice how quickly the markets tanked when they panicked over Covid in Feb/Mar 2020? It was all anyone was talking about at the time. If they've been savings in cash Isas since they began - 1999 - then they've lived through multiple periods of stock market turmoil.

They were only invested from October 2021.

Rollinghome

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

Rollinghome said:

Nebulous2 said:

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

There isn't an easy way out I'm afraid. 

Didn't the adviser discuss the long-term nature of what you were doing, your attitude to risk, and the possibility of fluctuating prices, before you bought? 

Just to be clear. The value of the investment will also have lost a further 10% in real terms too.  It's often very misleadingly suggested on this board that real-terms loss due to inflation magically doesn't apply to equity investments. It does.

To the OP.  That is the nature of investment versus cash savings. The return on investments can never be predicted. All we know is that, historically, equity investments have provided a better return than cash savings over the longer term.  Whether your investments are suitable for you depends on your very specific circumstances, details of which you may not want to put on a public message board.

From the scant details you have given, the advice seems fine, but no one can tell you where your investments will go from here, or when.

I think you may have misread or not understood the bit you have highlighted.  It was projecting forward. You have no idea whether equities will fall behind inflation over the next year or not. Going by the forecasts its very likely that cash will. 

Many investors measure their equity returns net of inflation - and are aiming for a percentage above inflation.  

Precisely. So why did you say "if you are in cash"?   Why "add another 10% loss on top for inflation over the next year if you are in cash" but not for loses on equities.

Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago.  None of us know whether equities will out-perform cash, or under-perform as they have YTD.  We don't know what the interest rate will be over the coming year nor the return on equities.  We do know that returns from any source are always reduced in real-terms by inflation.

Two possible scenarios:- 

He sells his shares and moves to a cash ISA which is what he proposed. I was saying that if he does that he will lose out by the difference between inflation and what he gets on his cash ISA in the next year. 

He keeps his equities. They could go down further, go up but not as much as inflation, break even or exceed inflation. Over the long-term investors expect to beat inflation, that's why they do it. Over the very long-term, with a diversified portfolio they pretty much always have. 

You then responded by saying:-  "The value of the investment will also have lost a further 10% in real terms too" 

You seem to be agreeing that we cannot predict what the stock market will do - but then you told him he will lose 10% in real terms.  

The bit of yours in bold - no it isn't. If you had £100 in cash and £100 in equities a year ago and still have the same today, then yes both have lost. If you now have £102 in cash and £110 in equities, then your equities have held their own. If you have £115 in equities today, your equities have outperformed inflation. 

Nebulous2 said: "I was saying that if he does that he will lose out by the difference between inflation and what he gets on his cash ISA in the next year."

What you actually said was "Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash ".  I would hope that most people would already grasp that if the rate of interest is less than inflation they would "lose out" - just as I hope you now understand that if you get a lower return than inflation than from investments (or a negative return), you will also "lose out".

If so, that's hunky-dory.

I understood that all along. What I actually said was:- 

It's certainly gone if you sell. Then you could possibly add another 10% loss on top for inflation over the next year if you are in cash. 

If he sold and moved to a cash ISA he would be compounding the problem by having to deal with rates below inflation for the next year. 

You consulted your crystal ball and claimed that if he lost in cash he would also lose in investments - without knowing what these investments would do. 

"Whether you are holding cash or equities, the valuation today is worth around 10% less in real terms than it did a year ago." 

Anyway enough of this, which has distracted from the OPs post. That was a nice post of yours at 4:38 wishing him well. Have a thanks.  He's in a tough place, having taken a drop and worrying about it. 

I hope you are agreeing with the bolded statement.

It means that the valuation of a year ago, whatever that valuation may have been, whatever the investment was, is now worth less in *real terms* than it was, as a result of inflation. It refers to the *valuation* of the investment, not to the value.  HTH and I don't think I can explain further. I don't know where you get your interpretation from, but anyway, it's been nice talking to you.