Demanding Investment Client

John and Suzanne are switched-on, wealthy individuals, with a sound basic understanding of investment principles and risk. John, 55, is a Chartered Accountant, and his wife Suzanne, 52, a primary school teacher.

Suzanne has a healthy Teacher’s pension to look forward to, and John has built up a SIPP worth £1.2m, which is being managed by a local stockbroker on a discretionary basis. They also have in excess of £500,000 in savings and investments between them, between deposit accounts with a major high street bank, and ISAs and GIAs also managed by John’s stockbroker.

They’d recently inherited £800,000 in cash from John’s parents’ estate. John’s first thought was to let his stockbroker manage the money, but Suzanne persuaded him to seek financial advice. “Don’t put all your eggs in one basket” were her words.

As such, they went to see Brian for advice in November 2016. Brian is a restricted adviser who deals with a wide range of financial planning issues including pensions, investment, and protection. Brian established John and Suzanne’s risk profile as Moderately Cautious regarding the £800,000 inheritance. John and Suzanne were happy to keep their existing holdings with John’s stockbroker, so no advice was sought on these holdings.

John and Suzanne wanted to invest the £800,000 inheritance for capital growth in line with their risk profile. Taking into account all of their circumstances, Brian recommended a joint offshore investment bond with a major life office. John and Suzanne were very happy with this recommendation, and it was put into force.

Six months later, John contacted Brian as he’d just received a £70,000 bonus from his company. This was added to the offshore bond that month, on Brian’s advice.

In November 2017, John and Suzanne entered Brian’s office for their first annual review. They were not best pleased; Brian had been unable to produce any meaningful figures to demonstrate the performance of their investment against the sector benchmark, which was the exact same scrutiny they subject John’s Stockbroker to. In a panic, Brian quickly calculated the return, but John pointed out that the figure provided by Brian was artificially high due to the additional £70,000 investment into the portfolio over the year. Both John and Suzanne felt that Brian was either incompetent, or trying to mislead them into thinking returns had been better than he was suggesting. John and Suzanne felt that as they were paying Brian 0.5% ongoing, which is £4,000 a year, they were entitled to a proper portfolio review each year.

Furthermore, John was concerned about an impending “market correction” he kept reading about online. He asked Brian for his view on the investment markets just now, but Brian was unable to provide John with a concise answer. Brian apologised, and promised he’d calculate real returns for them and get back to them later that week.

He spent some time on the phone with the Life Office, which was unable to provide him with the specific return for John and Suzanne. It was able to provide valuations, which he’d provided to John and Suzanne, but they were looking for proper performance figures. Brian even spent some time on the phone with one of the Life Office’s technical specialists. While they were able to explain to Brian how to calculate and evaluate portfolio performance in theory, they were unable to actually do the calculations and analysis for him.

He then called Expert Pensions Consulting. Here’s how we helped:

  1. We understood and defined the REAL problem. We understood the client’s issues. We diagnosed the exact problem before we started trying to find solutions.In John and Suzanne’s case, they wanted to understand the real return on their investment with Brian to allow for a fair comparison with their other investments and with the market as a whole; and get an independent, expert view of what’s happening in the global investment markets.

    John and Suzanne were not used to financial advisers. They were used to working with a particularly technical stockbroker, who provided exceptional portfolio analysis and market commentary. Don’t expect this level of service from all stockbrokers, folks!

    John and Suzanne were concerned about investment market volatility. They wanted a bit of chat from an independent financial professional to educate them and put their minds at ease. When we dug down, we understood that they wanted a view from Brian to compare with the view from their stockbroker.

  2. We discussed and clarified with Brian what the SMART objectives were. SMART objectives are specific, measurable, attainable, realistic, and timely objectives. Was it a tax-saving objective, a pension objective, or a tax-planning objective?In this case, the objective was that John and Suzanne simply wanted to understand the return on their portfolio, after charges, taking into account the lump sum additional premium to the bond.
  3. We sourced the relevant technical guidance from our extensive support libraries. We have access to the best brains in the UK. The best. We researched on John’s behalf, and provided the best academic research material and case study legal references money can buy.In this case, the calculations were already in the brain of Michael, our Technical Director. However, these were still checked repeatedly for accuracy, with supporting literature provided to demonstrate why and how the calculations work. For the market commentary, we regularly analyse two of the most comprehensive, unbiased sources of market information available to generate our own, completely independent view.
  4. We critically evaluated ALL the options. This is a must for your SMART advice. Good advice knows what not to do, and why. Good advice has looked at the technical rules and evaluated each one.In this instance, our critical analysis took the form of us showing our working, and demonstrating how we arrived at our answers. This was available for both Brian’s scrutiny, and John and Suzanne’s. We don’t just provide answers – we show how we produced them.
  5. We worked with Brian, aligning our SMART technical consultancy with his SMART advice: we produced white-labelled performance figures of the investment bond, providing both the time and money-weighted return figures. We also spent time with Brian, educating him on how to produce these figures himself in future.We also provided Brian with some independent market commentary, written in simple terms, for him to share with John and Suzanne. It was broken down under the different asset classes, and we even white-labelled it so Brian could put his company logo at the top.

    Brian than got back in touch with John and Suzanne to review their portfolio. John and Suzanne were very happy because they finally understood the return on their portfolio with Brian, and John in particular better understood the state-of-the-nation of the global investment markets on an appropriate level. But more than this, they feel they’re getting a much better value-for-money service from Brian. Their faith in his abilities was completely restored.

Brian is happy he found us – he thinks he’ll need our help again when/if the bond ever gets surrendered, and he’ll need a Chargeable Gain Calculation!
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