Should we be worried about our investment?

pinky13_2

My partner and I have an investment through financial advisors that were recommended to us by friends. However, we're not sure if we should stick with them or not.

We invested £90,000 with them at the start. We have had £1,800 taken off in fees to them and the company that holds our portfolio. We have about £40,000 in cash and the rest is invested in 15 different stocks/shares although even the cash is included in the wrap portfolio. So far our investment has gone down to approx £86,500 most of it just on fees. Our portfolio is doing very badly and at least 5 of the investments are down by 15-20%. We have to pay 2% annually in fees to our FA and the portfolio holding company. So far they have been very bad at getting back to us when we have questions. We are worried that they are not monitoring our portfolio closely enough and that they will not advise us to sell shares which are doing really badly. Most of the shares with the worst performance are in property.

The question is, does this sound like a normal FA or does it sound like we should leave. We are worried that any money we do make is going to be eaten up by their yearly fees and that they should be monitoring the market and advising us much more closely. At present we speak to them about once per 6 months and we pay them 1% of our investment yearly, even if it makes a loss and 1% to the wrap holding company.

We are new to investing and we do not own any property so this £90,000 is all our savings which we have accumulated over the years and obviously want to protect as well as possible.

Would be grateful to hear any advice regarding what we should expect from financial advisors and whether their fees seem reasonable.

Thank you!

LongTermLurker

If I paid someone to give advice I'd want them to co-respond with me and answer my questions. Equally, if I was giving an investment company £90k I'd want them to be nice to me. It doesn't sound like you're getting that. You deserve to expect better service.

Without knowing who or what you're invested in, 2% seems quite high as an annual fee. You don't say how long you've been invested; all property investments have gone downhill so it's no surprise you've taken a bit of a hit. You also don't say if it's actively managed (ie, will they monitor and switch your shares depending on market conditions or are the original choices static?). So far you've lost about 4%, including fees, which realistically isn't a lot, but there's a lot more information needed.

I'd be tempted to suggest maybe speaking to another IFA for a second opinion, but I don't know if they would be willing to discuss another IFA's business, from an ethical point of view.

earlgrey_3

Pinky, do they call themselves financial advisors or asset managers or stock brokers?

One problem with personal asset management companies is that it's often hard to learn how good their track record is to justify their fees. The management charges on unit trust is ridiculously high but at least you can see some sort of history and you can divide your money between different managers and different markets. If half get it wrong, with luck, the other lot get it about right.

Are the whole of the invested funds in individual UK shares?

purch

at least 5 of the investments are down by 15-20%

Which means if the whole portfolio is valued at £ 86.5k that most of the rest have appreciated in value, or the portfolio would be worth a lot less.

It does sound like this Investment is beyond your risk level, mainly because you don't appear to understand the vehicle or the products it is invested in. This could be the fault of the FA for not explaining correctly what he/she has set up for you.

kazwookie

I don't really understand all about these large investments and the fees you have been charged.

BUT

If I had £90k spare to invest, I would want to see by now at least £90,001 ie the money going UP not down by about £4K.

Personally I would be moving it into accounts of £35K each that got interest.

But like I say I don't not full understand these things, but I do understand £4k going!! I could do a lot with £4k

What ever you do good luck.

pinky13_2

Thanks for your replies so far;

LongTimeLurker: We have been invested since September 2007. The FA are supposed to be actively advising us on things like when to sell shares or invest in different accounts. They are very lax at replying to emails or answering the phones and last time we were told our email had gone into their spam filter so we had to wait 3 weeks for a reply.

earlgrey:Yes, they call themselves Financial Advisors. They work with a company who hold our portfolio and we pay not less than 1% annually to both them and the portfolio holding company. We were recommended this system by them as it is easier to view and move money and shares around. Some of the stocks/shares have been transfered to ISA's so we do not pay tax on that but the bulk of our investment is not in ISA's so we also have to pay tax on top of the fees and market losses.

Purch: As of today's date only 3 of the investments are in the postive. All the rest are making losses. The only other interest we have made is on the cash amount which we would have made interest on if we had invested privately in a savings account anyway. The cash is just invested in a savings account which makes about the same amount as any high street bank savings account.

Our investment was low risk according to the FA.

purch

Our investment was low risk according to the FA

Unfortunately the term 'Low Risk' usually means quite different things to the general public than it does to those in the Financial Advice Industry and even worse to those who regulate them

Most people, when they say 'Low Risk' mean they don't want any risk of the investment losing money, which cuts out any type of Equity investment.

I know that doesn't help your situation

Are there any charges or penalties for liquidating this investment ? Before you make any decisions that needs to be considered, and I would think any FA who has the cheek to charge 1% pa and then not answer your emails or phone calls would probably also have the cheek to charge you to end the agreement too !!

LongTermLurker

pinky13 wrote: »

Thanks for your replies so far;

LongTimeLurker: We have been invested since September 2007. The FA are supposed to be actively advising us on things like when to sell shares or invest in different accounts. They are very lax at replying to emails or answering the phones and last time we were told our email had gone into their spam filter so we had to wait 3 weeks for a reply.

earlgrey:Yes, they call themselves Financial Advisors. They work with a company who hold our portfolio and we pay not less than 1% annually to both them and the portfolio holding company. We were recommended this system by them as it is easier to view and move money and shares around. Some of the stocks/shares have been transfered to ISA's so we do not pay tax on that but the bulk of our investment is not in ISA's so we also have to pay tax on top of the fees and market losses.

Purch: As of today's date only 3 of the investments are in the postive. All the rest are making losses. The only other interest we have made is on the cash amount which we would have made interest on if we had invested privately in a savings account anyway. The cash is just invested in a savings account which makes about the same amount as any high street bank savings account.

Our investment was low risk according to the FA.

Hi Pinky

I think a few months - especially the last few months - is too short a timescale to judge the portfolio on. In order to make any money from the stockmarkets you need to be able to take a long term view; sorry if this sounds off-hand (it's not meant to be) but "you win some and lose some" - the hard bit is seeing your shares drop in value immediately. The trouble is that to many, "low risk" is translated as "no risk" and that's not the case. In 8 years (not a long time really) I've made good money in investments without risking life and limb, but the last few months have seen drops on some of my investments and rises on others, so I'm happy(ish).

I'd expect the IFA to explain things to you but - and don't take this the wrong way - if you were "always on their back" then many companies would reduce their responsiveness. I'm not saying that's the case, but bear it in mind. Taking the numbers, you've started with £90k and I guess they've taken their cut up front (I would have thought they would take it at the end though). This means your £88200 initial "investment" has been reduced to £86500 in 8 months, a loss of 2% excluding charges - to be honest, if mine had lost only 2% in the last 8 months I'd be happy.

You seem to have paid a year's charges already, so I would certainly sit tight until next August.

purch

to be honest, if mine had lost only 2% in the last 8 months I'd be happy

You must have low expectations then !!!! :eek:

pinky13_2

LongtermLurker: Thanks for your reply. I know we should wait as the markets are so volatile at the moment. We are just worried as in 3 months time we are going to have to pay another 2% so approx £1,500 just in fees again. Our FA has told us that there is no guarantee that stocks will always make a gain and that there will always be gains and losses. However, I think the suggestion from our FA to just wait until the market picks up again is quite simplistic advice considering we are paying them just shy of £1000 per year for a few phone conversations and a meeting once every 6 months.

Our other concerns are that we are not really sure if it was worth investing as after we have paid fees and tax even if we do make a gain on the investments it will be either the same or not much more than if we had just kept it in a cash savings accounts. That is the main worry. Our FA has told us that a 6% (pre-tax) gain is 'very good' but factor in tax and fees and we would get a little more than a high street savings account. Considering all the paperwork we have since investing we are wondering whether it is worth the time and effort in the long run.

LongTermLurker

quote: "and we pay NOT LESS THAN 1%... (to each of them" - er, do you mean you pay a performance fee? i.e if things go really well you would pay a higher fee?