Senior partner at Chessman & Partners, Mike Baughan, describes how he untangled a complex investment...
Senior partner at Chessman & Partners, Mike Baughan, describes how he untangled a complex investment situation.
Celia Williams was deeply affected by the death of her husband. At 83 and partly disabled, she had relied on him to sort out the finances over a 60-year period and their not insubstantial capital had been invested in a variety of ways.
Frank Williams had been something of an investment dabbler and the paperwork filled a filing cabinet and a bit more.
Things had now changed however. With a relatively large property to look after and a reduced widow's pension from her husband's ex-employer, Celia had a real need for additional income.
She was also worried about keeping control of investments she did not understand and dealing with masses of paperwork that arrived almost daily.
In short, she needed a financial makeover.
Husband Frank had invested in Peps in Celia's name every year with a major bank, all of which had been consolidated, and Celia was concerned that not only had the overall value dropped substantially but she was also paying brokerage costs and a hefty annual management charge.
I demonstrated that some of the unit trusts and equities making up the portfolio had performed very poorly and it was evident there was little management to speak of.
The £27,527 invested in Marconi shares as part of the Pep had been allowed to sink to £1,907 with no explanation as to the loss, which came as quite a shock to the client. Despite her letter to the bank explaining her current situation and the need for income, it had failed to respond in any way apart from a letter of assurance in reply. As a result, the income from dividends was just 0.98% gross.
Furthermore, Frank had invested a large sum of money into a unit trust fund where performance had been dreadful. Growth had been -5% over the past five years, yet he had incremented the fund on several occasions.
As an adviser specialising in capital investment and income provision, my priorities were to reduce the paperwork, consolidate the investments and provide Celia with enough income to live on. This would then serve the overall purpose of giving her a good standard of living.
The bottom line was that the tax exemption afforded to the bank equity Pep was of very little relevance to Celia and, in any case, consolidation meant we would have to transfer all rather than part of it. In the event, a full encashment was the best option.
The underperforming unit trust was partly transferred in-house and partly cashed in, as were a mass of other smaller investments. The new portfolio is up and running smoothly and Celia is now enjoying life to the full.
She is very grateful I sorted out the muddle for her, particularly as, apart from the surrender cheque, she did not receive any further correspondence from the bank.
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