Jeff Salway: Don’t bank on getting balanced advice from local branch ‘adviser’

‘So I went to my bank for some advice on what to do. I had my pension but wanted some income on top of that and had just over £100,000 to invest”.

This, almost word for word, is the part that comes up virtually every time I get a call from readers of a certain age who have entrusted their bank with their life savings.

On this occasion I was speaking to George, an amiable Borders farmer who was forced to retire in his early sixties through ill health.

With the money raised through the sale of one of his farms he went to his bank, where he has been a customer since 1962. He’s never had any problems with the bank and generally speaks highly of them.

So when he took his £100,000 dilemma to a financial adviser in a local branch, George did so because he trusted the bank and had faith in its ability to help him get the best for his hard-earned money.

Unfortunately, however, you can’t account for a branch-based financial adviser with a hunger for commission and a serious shortfall in the scruples department. He assured George that his money should be invested in funds offering stock market exposure and classed as medium risk.

How did he judge from a short conversation that George, investing a large portion of his life savings and no longer working, was a medium-risk investor? That suggests George was in a position to absorb some losses in pursuit of investment growth, yet all he wanted was a safe haven and a regular income from the money.

The good news is that the income did materialise. Sadly, however, the losses did too. Six years later George has suffered a £28,000 loss on his money and is now waiting for the bank’s investment managers to respond to his complaint. Hopefully he will later take his case to the Financial Ombudsman Service, which is likely to judge that George was a victim of mis- selling and entitled to compensation.

Perhaps the most frustrating element of his story is that this happens every day in bank branches all over the UK. Once he told me he’d gone into his bank for investment advice I knew what was coming next, because I’ve heard it many, many times and will do so again.

George doesn’t have a problem with his bank, which he feels has been very helpful in his 50 years as a customer. One rogue financial adviser (salesman, effectively, when it comes to banks) is all it takes to undermine that.

With the high street banks unable and unwilling to move away from a commission-based culture in which customers are mere sales targets, you’re taking a big risk every time you go to your local bank for help with investments. Tread carefully.

Fund management legend Anthony Bolton, pictured below, has revealed that he is to remain at the helm of the Fidelity China Special Situations investment trust; but is he in danger of losing the faith of the investors who piled millions of pounds into the trust on the back of his previous successes?

He lost more than £1 million of his own money in the trust last year as the share price tumbled by more than a third. In all, the trust is down by around 20 per cent since launch.

It’s all a far cry from his famously productive 28 years running Fidelity’s UK Special Situations Fund, during which he posted annualised returns of 20 per cent.

He’s a victim of bad timing to some extent, with the trust’s first two years coinciding with a period of Chinese market volatility even greater than he could have anticipated.

Bolton’s decision to continue managing the trust – having initially pledged a two-year tenure – could be viewed in one way as a bid to rescue a reputation in danger of being tarnished by his Chinese adventure. He admits he is motivated by a desire to turn the ship around and recoup the losses, as you would expect.

As Bolton rightly stresses, investing in China is a long-term game and one that will entail navigating choppy market waters.

Investor faith in Bolton has been tested for perhaps the first time; will they give him the time he needs? Or indeed should they? Many dived in purely because of the Bolton allure, instead of taking a more pragmatic approach to investing in a region that is perhaps better accessed through global, Asian or Far East funds.

The so-called cult of the star fund manager was a feature of the bull market midway through the last decade, yet many investors could pay the price as the pursuit of the big names comes back to haunt them.