Gilt Trade Issue

GiltTrader1

Thanks Poseidon 1
 Yes it is a Private Bank, and yes those two initial trades went well and were advisory. It was always said 'you're going to make £...... a significant gain tax free on this index link low coupon Gilt' and it matured on 31/3/24. Around two weeks before that I got an email saying that they now proposed that I step up with more funds and that they create two portfolios of low coupon gilts, one advisory and another portfolio that was discretionary. On the back of the initial results I decided to go ahead. So that first gain was whilst it was advisory. I was never offered the chance to take the gain in cash into my current account. They set out the the two portfolios in detail in an email and I queried the amounts that were 7 8 and 10 years in maturity not being what I wanted but they said don't worry 'we will be selling these earlier and that there would be 6 interest cuts during 2025 throwing opportunities to sell them' and although there has been a cut recently those longer term gilts are currently well underwater. I started to complain about this back in August and September and instructed them to move everything in discretionary back to advisory which they did. They say that if I hold these long term gilts to maturity I will get my return but that assumes the UK doesn't go bust in the meantime (which I feel is a real risk!) and inflation will no doubt destroy the purchasing power of  that significant gain. Meanwhile I have to pay their fees to practically do nothing.

 I have constantly continually complained about the 'significant gain' I never received in cash since I discovered I hadn't received it (April 2024). 
They are now asking me do I wish to formally complain about the 'significant gain' that I never received?
In your experience shouldn't they have had a standard procedure to have asked me whether I wished to take the gain off the table in March 2024? I cant imagine that they don't have such a procedure. If they do have such a procedure,  they didn't follow it and I may have some recourse on this.

Thanks again for your comments

wmb194

GiltTrader1 said:

Thanks Poseidon 1
 Yes it is a Private Bank, and yes those two initial trades went well and were advisory. It was always said 'you're going to make £...... a significant gain tax free on this index link low coupon Gilt' and it matured on 31/3/24. Around two weeks before that I got an email saying that they now proposed that I step up with more funds and that they create two portfolios of low coupon gilts, one advisory and another portfolio that was discretionary. On the back of the initial results I decided to go ahead. So that first gain was whilst it was advisory. I was never offered the chance to take the gain in cash into my current account. They set out the the two portfolios in detail in an email and I queried the amounts that were 7 8 and 10 years in maturity not being what I wanted but they said don't worry 'we will be selling these earlier and that there would be 6 interest cuts during 2025 throwing opportunities to sell them' and although there has been a cut recently those longer term gilts are currently well underwater. I started to complain about this back in August and September and instructed them to move everything in discretionary back to advisory which they did. They say that if I hold these long term gilts to maturity I will get my return but that assumes the UK doesn't go bust in the meantime (which I feel is a real risk!) and inflation will no doubt destroy the purchasing power of  that significant gain. Meanwhile I have to pay their fees to practically do nothing.

 I have constantly continually complained about the 'significant gain' I never received in cash since I discovered I hadn't received it (April 2024). 
They are now asking me do I wish to formally complain about the 'significant gain' that I never received?
In your experience shouldn't they have had a standard procedure to have asked me whether I wished to take the gain off the table in March 2024? I cant imagine that they don't have such a procedure. If they do have such a procedure,  they didn't follow it and I may have some recourse on this.

Thanks again for your comments

The chance to withdraw the gain was when the reinvestment proposal was made. 

I’m not sure why you’re panicking about gilts - you’re an inexperienced investor? I’m guessing gilts were proposed because you told the bank that you’re extremely risk averse?

poseidon1

GiltTrader1 said:

Thanks Poseidon 1
 Yes it is a Private Bank, and yes those two initial trades went well and were advisory. It was always said 'you're going to make £...... a significant gain tax free on this index link low coupon Gilt' and it matured on 31/3/24. Around two weeks before that I got an email saying that they now proposed that I step up with more funds and that they create two portfolios of low coupon gilts, one advisory and another portfolio that was discretionary. On the back of the initial results I decided to go ahead. So that first gain was whilst it was advisory. I was never offered the chance to take the gain in cash into my current account. They set out the the two portfolios in detail in an email and I queried the amounts that were 7 8 and 10 years in maturity not being what I wanted but they said don't worry 'we will be selling these earlier and that there would be 6 interest cuts during 2025 throwing opportunities to sell them' and although there has been a cut recently those longer term gilts are currently well underwater. I started to complain about this back in August and September and instructed them to move everything in discretionary back to advisory which they did. They say that if I hold these long term gilts to maturity I will get my return but that assumes the UK doesn't go bust in the meantime (which I feel is a real risk!) and inflation will no doubt destroy the purchasing power of  that significant gain. Meanwhile I have to pay their fees to practically do nothing.

 I have constantly continually complained about the 'significant gain' I never received in cash since I discovered I hadn't received it (April 2024). 
They are now asking me do I wish to formally complain about the 'significant gain' that I never received?
In your experience shouldn't they have had a standard procedure to have asked me whether I wished to take the gain off the table in March 2024? I cant imagine that they don't have such a procedure. If they do have such a procedure,  they didn't follow it and I may have some recourse on this.

Thanks again for your comments

Some private banks can be tricky to deal with, and where outcomes are less than optimum there can be few avenues for recourse other than take your business elsewhere. The bank made a bad call in anticipation of an acceleration of interest rate cuts that did not materialise as expected. In these situations the client suffers, sadly its is the luck of the draw since even private banks do not have a crystal ball to guarantee investment profits in all situations.

In your case the gilts in question have been  returned to an advisory mandate, but the damage has been done.

As regards continuing to pay  their fees for what may well be just a 'wait and see' portfolio of underperforming gilts, that is really up to you.

In your position I would transfer the holdings to one or other of the DIY platforms such as Interactive Investors , Hargreaves Lansdown (HL),  A J Bell etc.   In the case of HL I believe there are no fees to hold gilts in their fund and share account, but you would need to check whether all your gilts can be held on their platform.

Of course if you did this you would become your own asset manager and would have to decide when it would be advantageous to sell or hold to maturity at your own discretion. You would also have to ensure you alter the book cost of the gilts transferred over, since they would enter the platform at market value and you would lose sight of your book loss at that point.

Private banks do not like losing assets under management (AUM), so threatening to remove these gilts from their management could trigger a conversation about ongoing fees or even potential compensation. All depends how much you have with them, what other business they do for you and to what degree you would be comfortable ' horse trading ' over this issue.

You have an accountant, is your relationship with them such that they could assist? Some chartered accountancy firms can be proactive on their client's behalf in this regard, up to and including monitoring private banking relationships and introducing clients to other private banks if appropriate.  Mind you I am speaking from a London and South east perspective, not sure how this plays out in other regions.

GiltTrader1

Thanks for taking the time to comment Poseidon1
The initial gilt was in the low millions. I am not an expert. I called myself Gilt Trader1 to attract responses from all other Gilt experts on here.
I really expected them to not reinvest the gain.
Who wouldn't have taken the tax free gain off the table when that arose especially as I have retired.
They have asked me whether I wish to make a formal complaint. 
I would feel more confident of success if I found out that it was 'not normal' to simply reinvest everything, and even more confident that it was this Bank's standard practice to send me some written letter (like they do for maturing fixed rate deposits) asking me what are my instructions for that maturing deposit. I have rolled over signifcant deposits since 2020 with the same bank and I always received such a letter. In every rollover I always took the interest to my current account. It was never reinvested.
Thanks and Regards 

poseidon1

GiltTrader1 said:

Thanks for taking the time to comment Poseidon1
The initial gilt was in the low millions. I am not an expert. I called myself Gilt Trader1 to attract responses from all other Gilt experts on here.
I really expected them to not reinvest the gain.
Who wouldn't have taken the tax free gain off the table when that arose especially as I have retired.
They have asked me whether I wish to make a formal complaint. 
I would feel more confident of success if I found out that it was 'not normal' to simply reinvest everything, and even more confident that it was this Bank's standard practice to send me some written letter (like they do for maturing fixed rate deposits) asking me what are my instructions for that maturing deposit. I have rolled over signifcant deposits since 2020 with the same bank and I always received such a letter. In every rollover I always took the interest to my current account. It was never reinvested.
Thanks and Regards 

Unfortunately, as far as I aware all the gilt 'experts' on this forum are self advised, make their own decisions and use DIY platforms to execute their deals.

Furthermore, you appear to be part of a very tiny minority of the entire UK population for whom private banking portfolio management services are in anyway appropriate or accessible.  As a result you are not going to discover in this forum what is 'normal' with regard to private bank investing services in the circumstance you outline.

By and large  as previously advised you will be caught by the original terms of your discretionary management agree. The biggest stick you can wield is to the threaten to jump ship either in favour of another private bank investment service provider or as regards the gilt portfolio itself you could look at specialist gilt portfolio providers who could contour their service to your express requirements. Canaccord Genuity and Walker Cripps stockbrokers spring to mind in this regard.

 Such a threat could lead to a discussion  with the bank about compensation, but presumably you would need to kick off the process with a formal complaint. Ideally you would like to be placed back in the financial  position as if the rollover did not occur, but that would undoubtedly mean the bank suffering the losses you have identified. As I said, some 'horse trading' based on how badly the bank wants to retain you as a client, and too what extent you feel you can trust them to meet your future needs going forward.

As previously suggested can your accountant or maybe your solicitor ( I assume you retain one)  assist in crafting a formal complaint? The stakes seem high enough to bring in a little professional help to try and get to a conclusion on your behalf. I would hope at your level of wealth you have retained suitably competent professionals in this regard.

All in all,  bear in mind you are a valuable 'commodity ' in the private banking arena, so don't be shy to exploit that fact.

kimwp

I'm so intrigued as to what "low millions" could mean. Low 70's is the low end of 70-79 range, so low would be under 74?. Hundreds is 100-999, so low hundreds would be under 350? thousands is 1000-999,000, so low thousands is under 350,000, doesn't feel that low! Then what is the range for millions? Does it go up to a billion, so low millions is anything under 350 million?

GeoffTF

kimwp said:

I'm so intrigued as to what "low millions" could mean. Low 70's is the low end of 70-79 range, so low would be under 74?. Hundreds is 100-999, so low hundreds would be under 350? thousands is 1000-999,000, so low thousands is under 350,000, doesn't feel that low! Then what is the range for millions? Does it go up to a billion, so low millions is anything under 350 million?

It does not matter. As I understand it, a low coupon IL gilt matured and it was reinvested, but he did not want that. He can sell it. Let's say it was £1 million, and the spread is 0.1%. That is £1,000. It may be several thousand. If the OP did not spot what was happening, the price may have moved against him by a few percent. A loss of a few times £10K, perhaps. He can sell that holding, file a complaint and go to the FOS if necessary. He may or may not win, but it is free. If that is just part of his portfolio, he is probably gaining or losing a more than that every day. Nonetheless, nothing ventured, nothing gained.

kimwp

GeoffTF said:

kimwp said:

I'm so intrigued as to what "low millions" could mean. Low 70's is the low end of 70-79 range, so low would be under 74?. Hundreds is 100-999, so low hundreds would be under 350? thousands is 1000-999,000, so low thousands is under 350,000, doesn't feel that low! Then what is the range for millions? Does it go up to a billion, so low millions is anything under 350 million?

It does not matter to me. As I understand it, a low coupon IL gilt matured and it was reinvested, but he did not want that. He can sell it. Let's say it was £1 million, and the spread is 0.1%. That is £1,000. It may be several thousand. If the OP did not spot what was happening, the price may have moved against him by a few percent. A loss of a few times £10K, perhaps. He can sell that holding, file a complaint and go to the FOS if necessary. He may or may not win, but it is free. If that is just part of his portfolio, he is probably gaining or losing a more than that every day. Nonetheless, nothing ventured, nothing gained.

Fixed it for you.

GeoffTF

kimwp said:

GeoffTF said:

kimwp said:

I'm so intrigued as to what "low millions" could mean. Low 70's is the low end of 70-79 range, so low would be under 74?. Hundreds is 100-999, so low hundreds would be under 350? thousands is 1000-999,000, so low thousands is under 350,000, doesn't feel that low! Then what is the range for millions? Does it go up to a billion, so low millions is anything under 350 million?

It does not matter to me. As I understand it, a low coupon IL gilt matured and it was reinvested, but he did not want that. He can sell it. Let's say it was £1 million, and the spread is 0.1%. That is £1,000. It may be several thousand. If the OP did not spot what was happening, the price may have moved against him by a few percent. A loss of a few times £10K, perhaps. He can sell that holding, file a complaint and go to the FOS if necessary. He may or may not win, but it is free. If that is just part of his portfolio, he is probably gaining or losing a more than that every day. Nonetheless, nothing ventured, nothing gained.

Fixed it for you.

Please do not misquote me. I did not write "to me" and that is not what I meant. I meant that the precise size of the gilt holding is not relevant to my answer. The only scale factor that might matter here is the FOS compensation limit, but I expect that is enough. I doubt that it will go that far.

GiltTrader1

Poseidon 1-& kimwp. . I really hope I have accurately described what my issue is without going into the exact details of the amounts involved. The gain I made on 31/3/24 was the maturity of the first Gilt acquired in 2023. The 'gain' was a low 6 figure tax free sum. Up to that date and a week or so beyond, that was an 'Advisory' transaction over which I was supposed to have 'control'. I received a proposal for a much larger portfolio and I was happy to reinvest the old nominal amount I have previously invested together with additional investment in two low coupon portfolios which they recommended - one advisory and one discretionary. More recently I moved everything back to advisory as I was not happy about their recommendation that about 50% of the new increased investment went into 7,8,and 10 gilts but they said they expected 6 interest rate deductions this year and that I could sell them before their maturities and worse case I would 'get my return' if I held to maturity (which I do not wish to wait for that -inflation will kill any purchasing power buy then). These gilts are underwater despite the recent February interest rate cut. The 'six figure' amount which I never wanted to be included - they cant say in which gilt this was placed. 
I think I will make a formal complaint and see where this goes.
GeoffTF - I could sell the Gilts but would lose the six figure sum and more as I don't know where the six figure sum went as it was melded into the new monies I put in last April. 

Again I appreciate all your comments.