Finally, one of my old investments came on line so that I can go in and check it at will. It was an endowment policy that I took out back in 1992 because, frankly, I didn’t know any better in those days.
Years later, when the scandal of mortgage mis-selling reached a peak, I discovered that the first full year of payments that I’d made into this endowment policy went straight to the agent who’d sold me it. I didn’t remember him mentioning that when he sold me the policy. I made a claim against this for compensation, but it was judged that not pointing out this fact in plain English wasn’t seen as illegal or dodgy practice and my claim was turned down. The agent could show that he’d done everything else right in terms of the sale, and I suppose he had. But he took the first £1,500 of my payments which, 25 years later at maybe a 5% return….oh, it’s too painful to work out!
As I clicked through to the website to have a look at my investment, however, I suddenly find nothing’s changed. So far, this year to date, I’ve been charged over £700 in fees for the “management” of this policy. Suddenly, the screen before me went red. Then I realised it wasn’t the screen, it was a red mist of rage descending on my brain. Frankly, if they’d charged me a tenth of that for their “management”, I’d still have questioned it. Fifteen minutes later I was on the ‘phone to them trying to discover if I cashed the policy right now, today, were there any charges, bonus forfeits or anything else that I needed to be aware of before I did so? The answer was “no”, so I asked for that in writing. Preferably in their blood. And then I cashed it, well aware that charges of one sort or another on this policy over twenty five years had cost me in excess of twenty grand.
Isn’t that scandalous? It makes me feel almost physically ill. I mean, what are they doing for this money? I even originally chose the damn funds that the investments was being split into so they didn’t even have an input into that. Not that they were probably allowed to. I can still remember as clear as day how the agent (I’m not sure if they were called IFAs in those days) “advised” me on picking funds for the endowment. He basically held open a magazine and started flicking through pages that listed literally hundreds of fund options. He’d highlighted a few of these with a yellow marker as some that he, personally, found of interest but, of course, the choice of where to put my money was absolutely mine. What did I think? Again, he personally would choose maybe three or four to split my monthly payments equally into, but the decision of how many was up to me. Sitting there, in his office, I was at a total loss – this was all beyond me, but I was far too proud to admit that to him, or my young wife sitting next to me. I picked three with absolutely no idea what I was doing, but hoped that I looked as if it did.
Actually the funds I picked were none too bad, but I had no idea of the charges they’d accrue. I still don’t. In a way, I don’t want to know the detail because I can’t turn the clock back and change anything now. I’ve lost twenty grand. I’m on the verge of tears writing it down.
At this point, I have to grudgingly admit that this firm were – now – making very clear what I was being charged on my investments. I can’t say this about the other financial providers I hold funds with. Why can’t I, very simply, go into a website , click on that “Global Special Situations” fund and see what I’ve been charged on it this year to date? And I mean all the charges, every last one, shown as a total figure? With a percentage next to it that I can then compare to similar funds?
And, you know, maybe I can do that. But if that’s so, then it’s not simple – either to do, or to understand. And I’m bloody interested in this stuff! What chance have other people who are “trusting” that their grandly named fund management company will be giving them a quality service for a fair price?
They say that the margin in the fund management industry is over forty percent. They’re probably creatively accounting like mad to make it that low. I look at the City, the salaries and the bonus payments, the cosy self-congratulation about just how great they all are and it makes my blood boil. I’m paying for that, and so are you. Supposedly there’s change in the air with so much money now going to Index funds and government reports into excessive profits. Vanguard have also launched into the the UK with their lower cost model, and praise be to them. But until we get real transparency on fees, real healthy competition and a government more interested in consumers than a non-exec future seat on a City firms’ Board, change will continue at a glacial pace. After all, it’s been this way for a long time, and the customer’s yachts are still missing from the harbour.