There’s a story in Money Mail today that is interesting for a number of reasons. In a nutshell, Mr Price, a pensioner aged 89 and living in a care home was visited by his Barclay Bank “financial adviser”. Mr Price was concerned about the rising cost of care fees, and wanted to ensure they could be paid. Barclays set up a portfolio for him using just two funds (according to the Mail) both of which performed badly, although it has to be said that the timing of the investment and economic crisis clearly did not help. The Mail reports that he won £200,000 for the mis-selling by Barclays, who the Mail persuaded to reverse their previous decision that the advice was sound.

I have every sympathy for Mr Price who was clearly not informed of the risks of investing, but there are some other interesting points to this story.

1.The Mail’s headline implies that Mr Price received a £200,000 settlement. In fact, he received his original investment (£200,000) plus interest, less income taken and less the remaining value of the investment. In other words Barclays returned him to his original position. I dare say that creative headline “journalism” could learn a lesson or two as well as Barclays! Indeed inaccurate reporting does not aid stress reduction. One could view the power of the media to alter the outcome of a deliberated decision in various ways.

2.The “adviser” at Barclays, if the story is in any way accurate, would have been very foolish to split a £200,000 between just two funds (irrespective of which ones). A proper assessment of Mr Price’s attitude towards risk seems to be completely lacking, let alone the implementation of a sensible portfolio.

3.The adviser must have been under significant pressure to even consider investing Mr Price’s entire life savings, although I suspect the story lacks rather vital detail – the idea of someone aged 89 investing all of their money in the stock market is plainly folly. This is exactly the point that IFAs have been arguing for some time, where the FSA appear to take a far more punitive approach to IFAs rather than the “advisers” at Banks.

4.I doubt the “adviser” calculated the income required for the fees and what was already available, merely seeing the opportunity to invest funds and received a fairly significant commission on £200,000. So probably no financial planning was done, though I admit this is pure speculation on my part.

5.Barclays appear to have thought, however momentarily, that investing Mr Price’s £200,000 in this way was perfectly acceptable. It certainly isn’t.

6.Mr Price’s portfolio fell by nearly 40% – pretty much like most stockmarkets. It has recovered mildly since then but neither the Mail, Barclays or Mr Price have really paid heed to the reality of investing, and the need to take a long-term view. This is plainly Barclay’s fault for failing to properly advise Mr Price of this important factor. The reality is that stockmarkets, property, interest rates and virtually all types of asset have fallen in value following the credit crunch, which affects everyone.

7.The FSA, IFAP and IFAs in general continue to fail to communicate the message that getting independent advice is far superior than going to your Bank. The assumption that a Bank, who “look after” your cash, has the ability or wisdom to provide advice about what to do with your money is grossly misplaced. This merely proves that Banks profit from inertia and a false understanding of trust.

8.I also note that family members are no more qualified to understand investments or provide reassurance when it comes to financial planning. Unfortunately Mr Price was accompanied by his son, who was no apparently more able to understand the products or risk involved.

The main lessons from my perspective are clear.

•Avoid pressurised salesmen
•Seek independent, preferably fee based advice
•Don’t put all your eggs in one basket (in this case 2 funds)
•Don’t believe the headline figures (from investment companies or newspapers)
•Work out what you need, investment risk could have and almost certainly should have been avoided entirely by someone aged 89 living in a residential care home.
•Please, please, please, please forget getting advice from a Bank, this is not 1950!

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