An elderly gentleman telephoned us asking for information on corporate bond funds. Naturally, I probed. It turned out that he had been recommended to invest in one by one of the banks. I asked how much – £56,000 plus his and his wife's Isa allowances.
I thought that was an awful lot of money to be investing in one fund, let alone one type of fund. Why was he telephoning us to ask for information? Well….
But I dropped him a line with our standard text explaining fixed-interest funds, suggesting the benefits of diversification in as many ways as possible and, of course, including some discussion of structured products.
Upon phoning him a few days later to find out what he thought, I was surprised to learn that he had already made his investment before having phoned us.
“Well,” I said, “You do have 14-day cancellation rights and, if you feel uneasy about what you have done, then you certainly ought to consider exercising your right to cancel.”
“Oh,” he said, “I did raise this with the representative after the first time I talked to you but he said that if I cancelled the investment I would lose £2,000 or more.”
The question this raises in my mind is this – why is the FSA kicking the IFA sector when practices such as this on the part of the banks and building societies are so commonplace that virtually every IFA in the land could recount a similar tale?
Julian Stevens Partner, WDS Independent Financial Advisers, Kingswood, Bristol