Investment advice on behalf of a family member - do you?

[rollo19]

One of my wife's relatives (early seventies) has asked me to support her with her finances as she is in the early stages of dementia.

She has about £500k invested in stock market funds (ISA and directly owned), draws a state pension as well as drawing an income from her investments which remain at a relatively stable amount (i.e. she draws money from those funds, which is pretty much off-set by stock market gains). She also has c. £80k pensions from a handful of providers that are currently untouched.

Her FA is with St James Place and he has just conducted a pension review. His suggestion - consolidate all within an SJP retirement plan. Initial fee for doing so is 4.5% of current value and then the annual fee is c. 1.5% compared with her current charges of 0.7% per annum.

Unless I'm missing something obvious, this doesn't seem to be in her best interests!

I'm entirely comfortable taking my own investment decisions (without an FA or IFA) but there are definite shades of grey as to how far I am comfortable with making recommendations for others.

To me, the FA's pension recommendation is just absurd. I am comfortable saying that you shouldn't move because of the costs. I may be wrong of course - the SJP pension fund may way outperform her existing funds so that my recommendation is wrong, but in those circumstances I will sleep easy if she takes my advice.

It is still quite a responsibility and when I say there are shades of grey - this is a positive change that is suggested (that is plainly bonkers). I see my advice as "whiter" because it is maintaining the status quo. But what about her ISAs and Funds? Those are all consolidated with SJP - the fees are a little opaque, but the management fee/ annual fee is at least 2%, plus an additional 2% on any new monies introduced.

My recommendation: Move it all into a low cost wrapper that reflects her risk appetite (little) - e.g. a Vanguard lifestyle fund with really low fees, saving probably around £5k per annum. That's "blacker", because it is a move away from her established adviser. If I give that advice, she takes it and the market tanks (along with her investments), she may "blame" me for bad advice, even if it would be given in good faith and with the best of intentions and from a reasonably well-informed basis. In reality, she probably wouldn't blame me but I would still feel a huge responsibility (even though the SJP alternative would also most likely have tanked had she kept them there).

The other dynamic is of course that at the moment I can make suggestions and speak to her about the decisions (but ultimately they are her decisions at this stage). But in a few years, who knows - the financial PoA that we have in place may be active and I may not be able to speak to her about those issues. So, what would I do in those circumstances? Make decisions, in good faith, with the best of intentions and from a reasonably well-informed basis or maintain the status quo with an (expensive) FA that doesn't seem to be making recommendations with her best interests at heart.

I would really welcome the collective's views on how to navigate these kind of tricky issues:

1) When family members ask you for advice/guidance, how do you deal with it?
2) In my circumstances, what would you do? I think I'm at the place where the pension suggestion is so egregious that even though it is against the adviser's advice, I'm going to wade in, but probably leave the suggestion to move the funds.

(please feel free to move this to a different board if more appropriate).

[monabri]

"Initial fee for doing so is 4.5% of current value "

Bloomin' Heck....at least give us some warning before you use such obscene language! SJP has "form" for their stonking charges - google it!

You can get advice for free here at TLF. Just post a portfolio review and ask for comments. We know (now) the top figure is ~£500k so just express the individual holdings as percentages. For all we know, the portfolio might be fine as it is.



Why is she holding things with SJP ? ..move them to a cheaper platform would be my suggestion. In terms of "safety" if her assets are moved, who do you think is safer, SJP or someone like Lloyds bank (Halifax HSDL, iWeb ,Lloyds) ? There's a saving straight away, So you could justify any move on a simple cost saving grounds (better in her pocket than SJP's) and safety. I'd rather have £500k with a Lloyds platform than with SJP.


I know it's 11:30 in the morning but talk of 4.5% charges.....I think I'll need a brandy, I'm feeling quite giddy

[Aminatidi]

I did this for my mum.

Different circumstances and smaller amounts but long story short she was using an IFA and paying around 2.2% in fees for what amounted to a visit and a phone call once a year.

I showed her Vanguard and helped her open an account and transferred her existing investments and put them into a LifeStrategy fund that was roughly comparable in risk assets to the Standard Life fund she was in via the IFA.

I felt LifeStrategy was something I could easily "defend" if ever an awkward conversation arose.

My reservations in your situation would be if anyone points the finger in your direction and says "why the hell did you suggest that?".

Difficult one as the natural instinct is to try and help but there's also a strong argument for just keeping out of it.

[Itsallaguess]

In my circumstances, what would you do?

Advise her to keep things exactly as they stand...

That way -

1. You've done your bit to help her avoid what sound like simply awful up-front and on-going fees associated with following the 'helpful advice' from St James Place...

2. If you take the view that the market might be on the turn, or at least due for a period of 'consolidation', then any impact of that might be easier to take by your relative knowing that her overall portfolio structure hasn't changed due to any other advice from you, and whilst your advice might well have delivered a 'structurally positive change' in and of itself, there might still be a good chance of a poor outcome going forward anyway, depending on overall market movements over the coming years, so is there really a driving need for you to be exposed to the 'reputational risk' of that?

I think you seem to be asking yourself if you could help to provide a better structural set-up than the one your relative currently has, and whilst the answer to that question might well be 'Yes', I think you should also ask yourself if that will matter a fig, if the overall outcome from the moment she makes any 'advised changes' is still a negative one due to the potential for larger negative influences from the markets themselves at this time...

Simply put - any actionable advice that you offer might well be sound, but the timing of it might still be terrible, and I think the risk of that right now should be high on your list of considerations...

Cheers,

Itsallaguess

[DrFfybes]

The question is "how much ongoing responsibility do you want?"

You could be running her portfolio for 20 years here, and if you are prepared to do thet then get a PoA in place, or some Financial Providers will do allow nominated access for her accounts with them.

It sounds like her £500k is ticking along quite nicely without her stumping £9k to SJP up front.

If the market tanks, SJP's suggestions will likely do the same, but you might still feel guilty.

My choice would be to try and simplify things, move the investments to low cost funds on a fixed fee platform somewhere and keep a similar strategy to the current one. Consolidate her pensions to a SIPP on the same platform. If the on-cost is really 2% pa, then she is paying them nearly a grand a month to look after her money. Over the next 10 years she will pay over £100k in fees. One hundred thousand pounds.

You don't mention IHT planning, her family, etc and that is a different ballgame entirely but should be addressed now. As she is asking you then I guess there are no children (or not ones she trusts!).

Paul

[swill453]

It sounds like her £500k is ticking along quite nicely without her stumping £9k to SJP up front.

Or even £22.5k!

Scott.

[AsleepInYorkshire]

One of my wife's relatives (early seventies) has asked me to support her with her finances as she is in the early stages of dementia.

She has about £500k invested in stock market funds (ISA and directly owned), draws a state pension as well as drawing an income from her investments which remain at a relatively stable amount (i.e. she draws money from those funds, which is pretty much off-set by stock market gains). She also has c. £80k pensions from a handful of providers that are currently untouched.

Her FA is with St James Place and he has just conducted a pension review. His suggestion - consolidate all within an SJP retirement plan. Initial fee for doing so is 4.5% of current value and then the annual fee is c. 1.5% compared with her current charges of 0.7% per annum.

Unless I'm missing something obvious, this doesn't seem to be in her best interests!

I'm entirely comfortable taking my own investment decisions (without an FA or IFA) but there are definite shades of grey as to how far I am comfortable with making recommendations for others.

To me, the FA's pension recommendation is just absurd. I am comfortable saying that you shouldn't move because of the costs. I may be wrong of course - the SJP pension fund may way outperform her existing funds so that my recommendation is wrong, but in those circumstances I will sleep easy if she takes my advice.

It is still quite a responsibility and when I say there are shades of grey - this is a positive change that is suggested (that is plainly bonkers). I see my advice as "whiter" because it is maintaining the status quo. But what about her ISAs and Funds? Those are all consolidated with SJP - the fees are a little opaque, but the management fee/ annual fee is at least 2%, plus an additional 2% on any new monies introduced.

My recommendation: Move it all into a low cost wrapper that reflects her risk appetite (little) - e.g. a Vanguard lifestyle fund with really low fees, saving probably around £5k per annum. That's "blacker", because it is a move away from her established adviser. If I give that advice, she takes it and the market tanks (along with her investments), she may "blame" me for bad advice, even if it would be given in good faith and with the best of intentions and from a reasonably well-informed basis. In reality, she probably wouldn't blame me but I would still feel a huge responsibility (even though the SJP alternative would also most likely have tanked had she kept them there).

The other dynamic is of course that at the moment I can make suggestions and speak to her about the decisions (but ultimately they are her decisions at this stage). But in a few years, who knows - the financial PoA that we have in place may be active and I may not be able to speak to her about those issues. So, what would I do in those circumstances? Make decisions, in good faith, with the best of intentions and from a reasonably well-informed basis or maintain the status quo with an (expensive) FA that doesn't seem to be making recommendations with her best interests at heart.

I would really welcome the collective's views on how to navigate these kind of tricky issues:

1) When family members ask you for advice/guidance, how do you deal with it?
2) In my circumstances, what would you do? I think I'm at the place where the pension suggestion is so egregious that even though it is against the adviser's advice, I'm going to wade in, but probably leave the suggestion to move the funds.

(please feel free to move this to a different board if more appropriate).

My initial thoughts are

1. St. James Palace - I wouldn't use them if they paid me
2. If your family member had £500K in cash and decided to draw it down over say 20 years that would give an monthly income before any tax of £1,984.

I'd tell the FA to scoot and leave everything as it is and if you need my address for my fee please let me know

AiY(D)

[Dod101]

As others have said, if she is getting the income she needs from her current arrangements why change anything? Why was she motivated to ask you? Presumably by the advice from the SJP adviser which appears to be simply outrageous.

I have a friend who is a widow aged 75 but no dementia. She has not given me any numbers and I do not think I want to know but she gets 'advice' from an IFA because neither her late husband nor she were much into finance/investment. She asks me from time to time about things and all I have done (and want to do) is answer any questions she has but I have emphasised again and again about watching charges from the IFA.

For close family I would be prepared to get involved but for a friend or for a rather more distant relative I would prefer not to, except in very broad terms. However if your wife's relative is in the early stages of dementia she will need help at some point, and then probably quite detailed. No son or other close family? Who would be the beneficiary of her Will, or at least who would inherit? The last thing you want is an aggrieved family member or beneficiary of her Will.

if you are prepared to help out and there is no other person more suitable within the family then you need a good chat with her as long as she is able to make decisions. You would need to get a power of attorney if you are to act for her. At that point you would be in a position to start considering the investments but I think you are a few steps away from that at the moment.

Dod

[scrumpyjack]

I think you would be more exposed to an accusation of negligent advice if you endorsed going with SJP. It is so transparently high cost and self interested advice by the adviser that it just outrageous. So long as you go for something which is patently sensible and low cost (such as Vanguard Life Strategy or a whole world tracker or just do nothing), that is IMO something no reasonable person could attack.

Incidentally the people who set up SJP as I understand it, came from Allied Dunbar who were known as Allied Crowbar for their high pressure sales tactics and high fees. IMO SJP are similarly primarily a smooth talking sales organisation whose main aim is to charge the highest possible fees whilst making you feel good as they appear to be very very nice people. It staggers me that any sane person would go to them.

[monabri]

If the on-cost is really 2% pa, then she is paying them nearly a grand a month to look after her money. Over the next 10 years she will pay over £100k in fees. One hundred thousand pounds.

Paul

Man alive... £100k.....I need another brandy. I would investigate just how well SJP's recommendations have done compared to a cheap tracker fund?

I'm off for a lie down.

[monabri]

The Times July 21

https://www.thetimes.co.uk/article/four ... -md9hff8d7


Yesterday!
https://www.thisismoney.co.uk/money/mar ... eform.html

"St. James’s Place (SJP) was left reeling in 2019 after details of its opulent culture – paid for by clients – were laid bare.The wealth manager promised to change, but recent pay packages awarded to its leading executives have left some wondering whether the firm has learnt its lesson.A whistle-blower set out three years ago how company advisers were being rewarded with lavish holidays and diamond-encrusted cuff links – all paid for out of the fees which SJP charged savers."


https://www.yodelar.com/insights/st-jamess-place-review
89.7% of St James's Place funds rate as poor performing 1 or 2 star funds, making SJP one of the worst fund managers in the UK.11 Mar 2021

[uspaul666]

It’s tricky and alarming to give “advice” to friends and relatives. I tend to say stuff like “If I were in your position, I would do x, y and Z” or describe what kind of return/income in percentage terms you are getting on your strategy. I’ve learnt that people just don’t like to be told what to do, maybe because they don’t really understand everything about their financial situation and sometimes it’s kinder, though more expensive, to let them keep believing they got good advice originally.

It doesn’t always work though, I have a friend with money in a ISA paying 1% for a ftse tracker and they keep saying they will move it somewhere cheaper but 15 years down the line they still haven’t. Another friend has got a huge number of shares in the single company they used to work for who I tell to diversify and they haven’t. Luckily, the kind of people who have enough money to buy stock market investments usually have enough to live on even with swinging charges so I don’t feel too bad about not twisting their arm more. It’s not like they’re going to lose their house over it. (If it was, I’d probably be more forceful!)

Either way, In this situation, I think you would want to talk to your wife’s relative’s family / beneficiaries first since they are the ones that should be PoAs or will have to live with your advice?

[scrumpyjack]

It can be very dangerous to give investment advice to friends. If it goes well they won't thank you and if it goes wrong, end of friendship in a very sour way!

The law also has increasingly done its best to make a livelihood for investment advisers. Increasingly in many cases, other than for your own personal investments, you HAVE to use a professional. I was a trustee for 5 years of a substantial charity which had a large endowment and employed Coutts to manage the investments. The other trustees asked me to sort things out so the first action was to sack Coutts, whose fees were high though not as bad as SJP. I developed a formal investment policy, taking advice from friends who were other professionals and the policy was approved by the trustees and then implemented. It saved well over £100k pa for the trust and turned out well. After I left the trustees felt they had then to 'employ' a firm of investment advisers (Investec) on a fee of 0.6% pa because you have to be seen to have your investments 'professionally' managed. I would have taken the line that having put it in a good selection of investment trusts it is being professionally managed (by the IT managers). Anyway glad I'm not involved any more!

[rollo19]

Thanks - really appreciate all the replies.

To clarify a few points:

1) It is my mother-in-law and she has asked me for support as I work "in Finance" and my wife and her brother don't. She is suffering from early onset vascular dementia, which means she needs some support now as she doesn't trust her own decisions. She has financial PoAs in place for my wife and her brother, which are not yet active, but may need to be in as little as six months. She is in a position where she will listen to the people that she trusts on finance - those include her Financial Advisor and me.

2) I'm not in any way qualified - I'm an accountant by trade, principally dealing with corporate disputes - about as far away as personal investment advice as you can get. That said, I was a "Fool" as in the Motley Fool variety 20+ years ago and have been investing reasonably successfully on my own account. I'm trying really hard to park my own prejudice against FAs because I do recognise that they serve a purpose as a professional that creates some separation and an independent view. The problem arises when the advice that she has received is just so egregious - and I'm glad everyone else is falling off their chairs too or reaching for the brandy.

3) There are two separate decisions:

a) whether to move the four separate pensions of £80k to SJP (with a 4.5% initial charge, following by an annual charge in excess of what she is being charged at the moment). Frankly, just no. It is just so obvious to anyone that it would be a bad idea - and whilst you are all a bunch of randoms on an internet (;-)), I take some degree of reassurance that no-one is arguing that it is a sensible decision.

b) to move the £500k investment out of SJP. That's a harder call - and to be clear, there is no 4.5% upfront cost - it is already with SJP. However, the annual charges are relatively high, so let's say, we are talking about conservatively (as the charging structure is opaque as things stand), an "overcharge" (against Vanguard or similar) of 1.5% per annum. On £500k, that's £7.5k per year. Over ten years, that's £75k (before compound interest). Over twenty, that's £150k. Against a backdrop where she may well need nursing home care for many years, that's a significant sum. It's certainly what I would do, if it was me acting of my own account, but I take on board all of the comments and I'm acutely aware about the responsibility and/or it not ending well.

I suppose what you helpful bunch has clarified is that, ultimately, it's a grown-up conversation now, between, me, my wife, her brother and their mum (whilst she still has some reasonable capacity). They (and me included) are all close, so laying out the options as I see them in good faith, and letting the three of them make the call is probably the way to go. As things stand, I will be going against the advice of the FA on the pension, so the two people that my mother in law trusts on finance matters are already disagreeing on one thing.

I would welcome thoughts on an alternative "professional" in place of IFA - the problem that I see is that anyone worth their salt will probably want at least 1% as an initial fee to take over as an IFA/FA. That would be £5k... Is there anyone good/reliable/sensible that can advise on an hourly rate?

Thanks again - really appreciate the responses.

[fisher]

Is it possible to find out what she already holds with SJP and find similar funds with largely the same or similar holdings elsewhere that have lower charges? That way you'd not be increasing her risk just saving on fees. It might take a bit if work but I presume the SJP funds must produce annual reports with a fuĺl list of holdings, sectors and countires as other funds do.

You mention the ongoing charges are opaque but don't SJP have to produce an annual breakdown of the charges levied?

[DrFfybes]

I suppose what you helpful bunch has clarified is that, ultimately, it's a grown-up conversation now, between, me, my wife, her brother and their mum (whilst she still has some reasonable capacity). They (and me included) are all close, so laying out the options as I see them in good faith, and letting the three of them make the call is probably the way to go. As things stand, I will be going against the advice of the FA on the pension, so the two people that my mother in law trusts on finance matters are already disagreeing on one thing.

I would welcome thoughts on an alternative "professional" in place of IFA - the problem that I see is that anyone worth their salt will probably want at least 1% as an initial fee to take over as an IFA/FA. That would be £5k... Is there anyone good/reliable/sensible that can advise on an hourly rate?

First it is good that you can talk openly about these things. With both mine and MrsF's parents we were just left to sort it by our respective families, which made it easier as they either trusted us, or more likely couldn't be bothered getting involved.

Regarding the second part, a proper IFA will do an assessment for a fixed fee. Find one that is untied to a particular provider (not as easy as it sounds) and pay for an overiew. Not a recommendation as I've never used their serice, but HL do paid advice and a free consultation, 1% charge (assuming you take the advice) and 0.365% on-cost. Even those figures should be enough to persuade her to move Phone discussion starts at £495.
https://www.hl.co.uk/financial-advice/c ... ial-advice?

[NotSure]

b) to move the £500k investment out of SJP. That's a harder call - and to be clear, there is no 4.5% upfront cost - it is already with SJP. However, the annual charges are relatively high, so let's say, we are talking about conservatively (as the charging structure is opaque as things stand), an "overcharge" (against Vanguard or similar) of 1.5% per annum. On £500k, that's £7.5k per year. Over ten years, that's £75k (before compound interest). Over twenty, that's £150k. Against a backdrop where she may well need nursing home care for many years, that's a significant sum. It's certainly what I would do, if it was me acting of my own account, but I take on board all of the comments and I'm acutely aware about the responsibility and/or it not ending well.

Vanguard's SIPP fees 0.15%, capped at £375/yr. So on £500k, Vanguard are effectively charging 0.075%. Quite a saving! Of course their funds charge typically a fraction of 1% on top, but even so, SJP are going to have to massively outperform the market to justify their costs. I've no idea how they get away with it.

[Alaric]

a) whether to move the four separate pensions of £80k to SJP (with a 4.5% initial charge, following by an annual charge in excess of what she is being charged at the moment). Frankly, just no. It is just so obvious to anyone that it would be a bad idea - and whilst you are all a bunch of randoms on an internet (;-)), I take some degree of reassurance that no-one is arguing that it is a sensible decision.

It may well be sensible financial housekeeping to consolidate the pensions in one place. The problem with taking the advice of an SJP adviser on this being that they are tied to SJP. In other words they are not allowed to recommend lower cost alternatives. At 4.5% on the amount transferred, almost anything else is lower cost.

[vand]

It's a big responsibility managing someone else's money. Even though you may be very comfortable making your own investing decisions you have to err on the side of caution if doing so for someone else. That said, almost any sensible strategy will surely be better than going with SJP.

What are her income expectations, and does she expect to preserve any capital for estate planning, or is she happy running it down to (near) zero?

If it were me I suggest something splitting between a few simple strategy like:

1/3 into a vanilla 60/30/10 global stocks/bonds/gold portfolio
1/3 into a widows & orphans trust - either CGT and/or PNL
1/3 towards an annuity - she is at the age now where the benefits of an annuity are considerable given the increasing uncertainty over her remaining years

[scrumpyjack]

A couple of observations:

As I recall SJP used to have exit charges where the client had not been with them for enough years for them to drum up enough fees.

One line to take in arguing against SJP is that as a matter of principle it is not good to have an IFA who is also providing the funds because there is an obvious conflict of interest and inadequate competition on fees (hence the huge fees!).

As I think SJP's funds are all in house, moving elsewhere might trigger CGT events so you should check up on how much gains would be realised in moving. That is not a reason for staying but it might be ameliorated by doing over a couple of tax years.