losing money advice please

Wurz

Wish you luck, I spent months writing letters of complaint to Scottish Widows over their poor performance and I just lost more during their prevarications and delays in replying. If I had cashed in earlier.....would have lost less!

dunstonh

westy69 wrote: »

update i complained to the FA recieved their final (and only) reply today basically saying that they share my dissapointment in the funds performance but they feel the advise i was given is sound.....so saying IMO that i am only complaining because the funds are not performing well

so of to the ombudsman next

FOS will reject the complaint on the same basis if you are focusing on performance. Make sure your complaint really highlights the cautious nature that you have and the fact that the adviser agreed with that in their report but then went on to build a medium risk or higher portfolio. Risk attitude is where you are most likely to win.

westy69

what i find very annoying is that in my initial complaint letter i did not even mention the performance, they seem to think of their own accord that i am complianing aboutthat.
I have complained purely about the risk factor and volatility, i think they are just picking that up to avoid answering my complaint.

dunstonh

They shouldnt do if they are dealing with the complaint correctly. However, it doesnt surprise me. However, its clear from the text they have used in your letter that the funds dont match the risk.

meester

Seems quite a simple letter:

Given:

We then moved on to talk about your attitude to investment risk and which funds the investment bonds would invest in. During our meeting you confirmed yourself to be a cautious to balanced risk investor meaning that you were happy to invest in assets outside of traditional bank and building society accounts, and were prepared for the value of some of your investments to fluctuate. Given that this is the start of your investment portfolio my recommendation was to use asset classes that had lower volatility than direct equity holdings and reduced the risk exposure by creating a rounded portfolio including distribution funds (which would invest in equities, bonds and commercial UK property) and global property. When added to your cash holdings this will provide a balanced exposure to different assets without placing a large proportion of your capital under the exposure of the stock market

You say:

'In my conversation with IFA, I explained that I had a cautious attitude to risk, and wanted a low-risk investment strategy. This is confirmed in the notes from our meeting.

According to the notes (enclosed copy), I was 'cautious to balanced risk', and was prepared only for 'some' of my investments to fluctuate in value. In addition, it was resolved to choose funds that have 'lower volatility than direct equity holdings', and not to place 'a large proportion of capital under the exposure of the stock market'.

However, I have since learned that the funds chosen for me did not meet my requirements in terms of attitude to risk, and directly contradict the notes of the investment meeting.

20% of my total investment was invested in Norwich Union Global Property, a very high risk fund investing solely in property REITs, with 90% exposure to overseas markets. Given the excessive exposure to more volatile overseas markets, currency risk, and the fact that REITs are significantly more volatile than blue chip equities, there is clear misselling in devoting 25% of my portfolio to this fund, given the stated desire to have a lower risk investment strategy, and given that the fund does not actually hold any property. According to the firm's 2007 factsheet, 78.3% of assets were invested in Global Equities, an entirely inappropriate area to devote so large a proportion of my investment, and completely contradicting the stated strategy to get a lower risk than equities would offer.

A further 25% of my portfolio was dedicated to Standard Life's Select Property fund, which is also devoted to global property equities, again a totally inappropriate level of risk for me, contradicting my instructions. In addition to the inappropriate high risk investment decision of global property equities, the fact that half my entire investment sum is in this area is, I have been advised, ludicrous for someone with my stated appetite for risk.

As I have been clearly missold, my initial investment should be refunded with interest."

dunstonh

Nice response meester. That is exactly the approach to take. You need to use the risk profile wording in that suitability letter against them. I refer you back to post #12 if you want to break down the failings of the risk profile as they have written it.

My bet is that they have not realised the high risk nature of property shares compard to bricks and mortar. It is a very common error with inexperienced investors and it appears inexperienced or low skilled advisers (it is one I have seen before).

As a reminder, the funds gave the following split:

61% property (of which 50% is property shares and 10% is bricks and mortar commercial property - rounding makes 1% difference)
22% UK equities
13% fixed interest
4% cash

This means that 72% is stockmarket, 13% is fixed interest, 10% property and 4% cash. 1% error is due to rounding.

Only the 13% fixed interst and 10% bricks and mortar property (the only cautious sectors) and 4% cash fall on ro below your risk profile. That is 27% of your portfolio.

22% is general stockmarket (medium to medium high) but 50% is global specialist and is medium/high to high risk.

Investing in funds above and below your risk profile is acceptable and often desirable but they have to average out to match your risk profile. This does not match the risk profile they have documented.

westy69

thanks again brilliant advice as usual - will keep you informed :beer:

westy69

As I have been clearly missold, my initial investment should be refunded with interest."

should i be that direct on the form?

thanks

dunstonh

When an inappropriate product is sold, the most common outcome is for the product to be voided as if it never existed and your money returned with interest. That is what you should request.

meester

westy69 wrote: »

As I have been clearly missold, my initial investment should be refunded with interest."

should i be that direct on the form?

thanks

Just to add, dunstonh makes a point about balance which would be worth adding

"In addition of my total portfolio, over 72% is invested in equities, with just 13% in fixed interest products, 10% property and 4% cash. The portion of the portfolio invested in equities is clearly excessive relative to my stated appetite for risk and contradicts the notes from our meeting".