Nationwide Mortgage Linked Equity ISA

gogsboy

Wonder if anyone took out one of these, I did so in 2002 and so far so good....until it changed hands to legal and general.

For the first time my statement tells me I have lost money.

It was worth 8k on Sept 07 and now current statement correct to 31st March, its only worth 7.6k.

Is this coincedence? Seems a bit shifty too me, is that a sign to skin out of it.

Any words of wisdom appreciated

turbobob

Don't know the product (do you know what fund its invested in?) but the term "Equity ISA" suggests its a stocks and shares ISA. These can of course go down as well as up. The start of 2008 was very turbulent with many equity funds losing quite a lot (regardless of who they were with).

Taking a wild guess, you can see how the ex-Nationwide tracker fund has done here - http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?tab=1&Id=F0GBR0521O&lang=en-GB&LanguageId=en-GB&CurrencyId=GBP&ClientFund=0&lastPageURL=

Maybe more concerning is that you don't seem to know this. They are quite risky products and therefore it might not be right for your attitude to risk?

dunstonh

For the first time my statement tells me I have lost money.

Of course it would. late 2007/early 2008 was a bad period for the FTSE.

Seems a bit shifty too me, is that a sign to skin out of it.

Its not shifty at all. The value of your investments can go down as well as up. In the early years, periods of decline are actually a good thing as you end up buying your units cheaper and over the long term these are the units that make the most money. In the short term though you see occassional drops in value.

Using ISAs for a mortgage is an experienced investor option. It isnt really something for someone that doesnt understand it. Every Nationwide ISA mortgage I have come across I have moved the ISA to something better as their option is too simplistic, not monitored and rebalanced and the investment area is generally not really worth the level of risk taken.

So, the concept of an ISA mortgage is fine but the way it is being done for you isnt.. in my opinion. I suggest you get an IFA to review the ISA mortgage as they should have no problem offering a better alternative. They can also explain it more to you so you can understand it more.

gogsboy

Yes I should have said its a stocks and shares ISA.

I fully understand they can go down, obviously I'm no expert but this loss coincides with them taking the reigns and includes the tail end of 2007 as well as the starts of 2008.

My point or concern is that it's not the first time since early 2002 that the word turbulent has been bandied about.

Looking at that graph, it's cause for even more concern is it not, as I went into it early 2002 and that graph shows a near vertical line in that period yet my fund never lost money.

Since L and G have taken over, I have pretty much lost whats been paid in, not good business when they send out forms asking if you want to pay more in!

More concerning I don't know whats exactly? All I need to know is how much I am paying in which I do and what the increase is once my statements come in, not a lot else to it really.

I knew the risks and I was well aware when took the product out early 2002 and it's been steady...until L and G came on the scene.

gogsboy

dunstonh wrote: »

Of course it would. late 2007/early 2008 was a bad period for the FTSE.



Its not shifty at all. The value of your investments can go down as well as up. In the early years, periods of decline are actually a good thing as you end up buying your units cheaper and over the long term these are the units that make the most money. In the short term though you see occassional drops in value.

Using ISAs for a mortgage is an experienced investor option. It isnt really something for someone that doesnt understand it. Every Nationwide ISA mortgage I have come across I have moved the ISA to something better as their option is too simplistic, not monitored and rebalanced and the investment area is generally not really worth the level of risk taken.

So, the concept of an ISA mortgage is fine but the way it is being done for you isnt.. in my opinion. I suggest you get an IFA to review the ISA mortgage as they should have no problem offering a better alternative. They can also explain it more to you so you can understand it more.

Again look at that graph so why did my value not drop over 2002, or any other time, or has the FTSE been a bed of roses for 6 years?

What sort of prouducts have you moved them onto for example?

I had an IFA look over everything just before L&G took hold and they said stick with it

turbobob

If thats the fund its in, it is an FTSE100 tracker. That means it will track the FTSE100 index, which it looks to have done quite closely. So its losses are nothing to do with L&G taking over. You might also notice that it lost nearly 40% from 1999-2002 (this period included the dot com crash and 9/11).

I will say its annual management charge of 1.5% is very high for a tracker though - thats what you'd expect on an active managed fund (trackers are known as passively managed and are usually charged at much less than that).

The FTSE has gone up in general from 2002 until recently. Heres a chart showing the same fund vs the FTSE 100 over the last year. The correlation should be obvious.

dunstonh

Again look at that graph so why did my value not drop over 2002, or any other time, or has the FTSE been a bed of roses for 6 years?

Maybe you were lucky with the statements. I remember a lot of people missed the 45% drop and only saw a 7% drop because the statement period covered the worst of the drop and the start of the recovery. Plus at the beginning you have hardly any value and your monthly premiums are buying units cheaper. This time round you had a noticeable value before the drop.

I had an IFA look over everything just before L&G took hold and they said stick with it

You sure it was an IFA? I cannot believe any IFA would leave you in there. Tied or multi tied certainly would as its outside their remit to churn another company's product (officially) but an IFA is encouraged to do it when its best advice and this is an easy one to justify. Lower charges and better investment choice would be the two main ones.

gogsboy

turbobob wrote: »

So its losses are nothing to do with L&G taking over. You might also notice that it lost nearly 40% from 1999-2002 (this period included the dot com crash and 9/11).

I will say its annual management charge of 1.5% is very high for a tracker though - thats what you'd expect on an active managed fund (trackers are known as passively managed and are usually charged at much less than that).

Thanks for the info, yes the reason I went for this product was based on what goes down must go up and that everyone wants a piece when the chips are up but not when they are down and like you mention 9/11 so the chips were down.

As for L & G, just never seen them as people who I would trust with my money, don't they normally sell insurance, is that not their forte?

With regards to the 1.5% charge you mention, has this been the charge for a long time, it's just I don't recall it being mentioned, if it's a new or increased charge its maybe since they took over but I have been away out the country so not had time to go through the piles of paperwork left for me

gogsboy

dunstonh wrote: »

Maybe you were lucky with the statements. I remember a lot of people missed the 45% drop and only saw a 7% drop because the statement period covered the worst of the drop and the start of the recovery. Plus at the beginning you have hardly any value and your monthly premiums are buying units cheaper. This time round you had a noticeable value before the drop.



You sure it was an IFA? I cannot believe any IFA would leave you in there. Tied or multi tied certainly would as its outside their remit to churn another company's product (officially) but an IFA is encouraged to do it when its best advice and this is an easy one to justify. Lower charges and better investment choice would be the two main ones.

Cheers for the info, yes was thinking that, never had a great deal of units so obviously not the same drop as just witnessed.

Yes it was indeed an IFA, why does that surprise you, I have just inspected a 'joiners' work at my house and he claimed he was excellent at his job but I am not a joiner and I could have done a better job....same in all trades and lines of work, good and bad.

Can you recommend the type of investment I should be looking at or would the money be better used by converting to either full or part repayment instead of interest only

dunstonh

Yes it was indeed an IFA, why does that surprise you, I have just inspected a 'joiners' work at my house and he claimed he was excellent at his job but I am not a joiner and I could have done a better job....same in all trades and lines of work, good and bad.

I know there are good and bad (hopefully less of an issue from next year with new FSA rules) but even if it was a rubbish IFA, you would have expected him to re-register the ISA so he gets paid the trail commission. The rubbish ones tend to be lazy and want easy money. A good one would transfer the ISA and give you a better fund spread.

Can you recommend the type of investment I should be looking at or would the money be better used by converting to either full or part repayment instead of interest only

Against board rules and it would breach FSA rules too if I did it. However, as I said higher up, the concept of ISA mortgages is fine. I do it with mine and I am on track for hitting target about 8 years early. All those on my books are similar and I suspect other investment specialist IFAs would be exactly the same.

What you have at the moment is the simple option and I personally dont think how you are invested is worth the risk that you are taking. The potential isnt there. Your choice then is either get the funds switched and a better portfolio built (with what you have built up already and monthly payments going forward) or switch to repayment. I dont think staying as you are is a good option. That is a choice you need to make though.