In 2006/07, all three were in or close to retirement. All three were looking for income. All three were inexperienced investors who received advice from their high-street bank’s wealth management service.
The plumber had £450,000 from the sale of his business. The adviser placed it all in a unit trust. Not a portfolio. One unit trust.
The bricklayer had two unit-linked investment bonds and an Isa, whose total value was £95,000. His adviser cashed in the bonds and transferred the Isa, reinvesting the whole lot into a unit trust. not a portfolio. One unit trust.
The engineer had three with-profits bonds with a surrender value of £360,000. His adviser cashed them all in and reinvested the lot in a unit trust. Not a portfolio. A single unit trust.
Three different advisers from three different branches of the same bank. Barclays.
Three different advisers but all of them chose the same unit trust – Morley (now Aviva) balanced global income fund. Launched June 2006. Performance to March 2009 over the past 12 months: -45.1 per cent.
All three clients had their retirement years ruined by this catastrophic outcome, two of them with losses exceeding £150,000.
I am certain that no IFA would ever invest all of a client’s money in a single unit trust, let alone this one, which had no track record and features in the Invest – ment Management Asso – ciation’s specialist sector.
This sector is for funds “outside the mainstream”. This fund invests in convertibles, call options, non-investment-grade bonds and equities – hardly a core fund for the unsophisticated low-risk investor.
I am not sure that Barclays has a compliance department. If it does, how could it have approved the churning and lack of diversification displayed here?
Barclays does, however, have a complaints’ department. The plumber is the only one yet to have had a reply to his complaint. Barclays told him that because he held “windfall shares” worth £8,500, he was an “experienced” investor who must have known the risk he was taking.
No exper – ienced investor would put all his money into a single “specialist” unit trust. Only inexperienced investors and Barc lays advisers would do that, QED, the client is not an exp – erienced investor. His comp – laint is now with the Financial Ombudsman Service.
What was the incentive that attracted the advisers to this fund? It seems that trail commission of 1.05 per cent a year was paid on this fund, which, of course, is twice as much as on most unit trusts and at least four times as much as corporate bond funds, many of which pay no trail at all.
I now have six clients in various parts of the country with the same Barclays/Aviva experience. We believe there are hundreds, perhaps thousands. of people wrongly invested in this high-risk fund.
We are setting up a website inviting other victims to come forward with a view to instigating a class action. We would be pleased to hear from IFAs who have clients with the same complaint.
And to those of you reading in a more venal spirit, don’t expect that handsome trail commission to come over to you with the servicing rights – it is all sewn up in the product commission and it goes to Barclays in perpetuity.
Park House Financial Services