In this case study the names of the individuals and some other minor details have been changed for privacy, otherwise the following  is based on a true story……….

David, in his late 50s, had retired early from a well-paid job in electronics.

He had accrued wealth throughout his working life supported by generous bonuses, share options and an old-style company pension.

By the time he reached 50 he had just over £1 million in invested assets, two properties, his main home in the North-West and a holiday home, for his own use primarily, in North Wales. He had accessed his company pension on retirement, reduced somewhat by his early release of the pension, but still paying him over £30,000 per year and indexed against inflation, so that regular rises would occur.

He still works on and off in a consultancy capacity and when he does he is able to charge around £800 per day for his time.

David is married and has been, to his wife Julie, for just over 30 years.

His mortgage is cleared and apart from the odd small credit card balance has no debts.

His finances are in good order.

But David has a problem.

Just before he retired he attended a seminar held by a “leading” wealth management company with a reasonable market reputation. David had no idea (and was never properly told) that this Company was essentially ‘restricted’ in its advice permissions. This meant the Company and the adviser David engaged with were only able to recommend financial products from their Company.

Its five years since he took this advice and all his and his wife’s invested wealth – including his ISAs, retail investment accounts, and  a residual pension – amounting to £1.3 million are in holdings run by the one Company. True, he has a spread of funds underneath this umbrella arrangement with diversified holdings and a range of underlying fund managers, which provides some element of not having all his eggs in one basket. But he was advised by an adviser who had limited options to where the money could be placed.

In the five years David noticed a couple of things that worried him. One, the growth on his invested sums, across the board, was being reported at just under 5% per year, but by his calculations the growth measured by current value should he cash the whole lot in (not something he was planning) was a little over 3% per year. Two, he couldn’t understand the charges and despite having written to his adviser on several occasions for explanations, was still in the dark.

He also wanted to explore exactly what risk he was taking and included references to this in his letters to the advisers, he was not convinced by the answers.

Finally, in context of his ‘problems’ he was concerned by his legacy and his and his wife’s wish to start doing more to financially support their now adult children, especially onto the property ladder, reduce or limit taxes, both current and future and was unsure why part of his wealth was wrapped into a Discretionary Trust. Again answers to questions were coming back in a way that confused him.

David – having worked in electronics – liked and valued precision.

If something is unclear it is important to him to sort this and get clarity.

Therefore, he upped his interrogation of the adviser in the context of the costs he was incurring. Still, answers came back which were confusing. He asked for a simple figure: “how much IN TOTAL as a percentage of my portfolio is being deducted in charges” – “just one figure please: 1%, 1.5%, 2%, 2.5% etc.??”

Still, no clear answer.

David then took the plunge and decided to get new help and met with an Independent Financial Adviser (IFA) and handed all the paperwork to her and asked the same question. Three weeks later after some investigation the IFA came back with an answer – 2.4% per year.

So every year cumulatively the charges and costs on David’s portfolio was reducing the growth by 2.4% or somewhere close to £30,000 per year in various charges and fees.

That bothered him.

But what bothered him more was that he couldn’t get that answer from the Company entrusted with looking after his money.

The IFA noted something else. The Company looking after the investments had a very specific and unusual aspect to their charges, the invested sums had to stay with the Company for six years otherwise they would be subject to an exit charge. Some of his money had only gone into the Company in the past few years, as he used ISA allowances etc., and these were subjected to the exit charge for a fresh six years, each time new money went in.

The growth on his money (even ignoring the charges) had been modest compared to similar portfolios he could have used.

His conclusion was simple, he was getting very poor value for money.

However, what made David act wasn’t the modest growth, after all this is subjective, but  the lack of clarity, the lack of transparency and after talking with the IFA the realisation that his overall finances were not being co-ordinated in a particularly joined up fashion, with some concerns over the structural nature of the Discretionary Trust in relation to his needs and goals being a further aspect which disturbed him.

David took the decision to move away from the Company and has started to work with the IFA where, in particular, he can now see things clearly, knows exactly what risk he is taking, what charges he is paying (and what they relate to) and has a completely new approach to the mixed requirements and goals which he has to balance out.

The moral of the tale?

There are some things you can control and some you can’t. Future investment returns, economic  conditions, longevity, children getting divorced are largely out of one’s control. Charges and costs, what goals to pursue, strategy and planning are largely within one’s control.

David had a simple need – to be completely on top of everything, working with a trusted adviser and to have clarity about his position. That well-known Wealth Management Company failed to meet this need, so although they had done nothing wrong, in terms of the financial advice, they had broken another fundamental of the financial world, which is to help people rest easy about their finances, sleep well at night and see the clear picture.