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Bank advice criticised after investment falls

An IFA has hit out at NatWest for advising a pensioner who did not want to put capital at risk to invest £140,000 from the sale of her house in funds that fell by 30 per cent in two years.

Euro IFA adviser Ken Hopkins says the client sold her house for £140,000 in 2006. In September the same year, she saw a NatWest adviser who recommended her to invest £100,000 in a Fidelity FundsNetwork bond.

Within the bond, the money was split equally between two life funds, the Standard Life ethical fund and the F&C stewardship income fund. The adviser recommended the client, aged 69, to invest the remaining £40,000 in the Aegon ethical corporate bond fund, with £7,000 of that in a maxi Isa.

The total investment represented 97 per cent of the client’s total assets. Hopkins says the client did request ethical investments but she made it clear that she did not want to risk her capital.

Hopkins says: “Her sole requirement was the security of her capital and the certainty that it would provide the additional income she needed to pay rent on her new home. She was not looking for capital growth.

“For the adviser and then the NatWest complaints’ department to seek to justify putting more than 97 per cent of a 69 year-old, single, non-taxpayer’s total assets in unit-linked pro- ducts is ludicrous.”

A NatWest spokeswoman says: “The bank has carried out a full investigation into this complaint, including the suitability of advice given, and we reject any suggestion that our advice was unsuitable.

“Information provided by the customer in 2006 showed that she was a taxpayer and that her overall attitude to risk was medium. The advice provided and subsequent agreed funds elected were consistent with her risk appetite and her circumstances at that time.”

Hargreaves Lansdown head of financial practitioners Danny Cox says NatWest’s documentation made it clear how the money was being invested but the investments were not suitable.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I wonder how much commission the bank staff and the bank itself pocketed from just one captive client! I think in a case like this the Bank should have suffered commission sacrifice and/or invested most of the commission in the clients investment.

  2. There goes another IFA criticising the banks. You were not there when the woman agreed to the proposed investments. If the woman honestly said she did not want to expose herself to capital risk, the bank advisor would have just let the money languish in one of their ‘high interest’ accounts. Obviously, the advisor discussed inflation with the lady, they probably went through past performance graphs for the investments in question and she was warned that there is no guarantee the same would be repeated. They probably gave her some coffee/tea & she felt really appreciated. She was very happy that she didn’t have to pay a penny for the advice, my £1,000 flat fee would have scared her away. She was probably told that the value of her investments would go up and down on a daily basis & if she kept a longer term perspective, she would reap the rewards. 2 years is short term. She asked for income, I bet you she’s still getting that income. She was medium risk back then, the investments mentioned back then were classed as medium risk by all the then reputable ratings agencies. As for the emergency fund, at 69 she must have had some money stashed somewhere that could last her a year or so if she lost all her assets. I don’t want to believe that all her money was in her house otherwise all her life she’d been really ill – advised. Her investment objective was reasonable income until she dies, corporate bond funds provide reasonable income, that’s what she got. I’m sorry I don’t sympathise with this lady or anyone else who’s lost money. It’s time people took responsibility for their own actions. If she had bothered to read the paperwork before she signed it she would have known what she was getting into. For someone with 30 or so years left to live to put most of their money in cash is a sure way to have your money outlive you. The IFA in question is just attempting to gain publicity by allowing consumers to use their ignorance & complacency as a basis for complaint.

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