# Lost 7K in one year



## Cheese (31 Jan 2008)

Hi All, 
In Jan 2007 I invested €50K with Standard Life in UK Commercial property, on a 5 year term, on my Financial Advisor's advice.  He had said the bond was performing very well.  Management Fees 1.2% p.a.  I got my first statement today and I'm in shock - current value is €43K, surrender value €41.   This was to be my pension but €7K is a huge loss. I can manage without it for the next 4/5 years but I'm worried it will keep reducing and just dwindle away.  Panic has set in now and I'm wondering if I should cut my losses, withdraw the 41K and invest in something more reliable.

Can anyone give me some advice please.


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## Brendan Burgess (31 Jan 2008)

Hi Cheese

I suspect that the surrender value is a lot less. There probably would be early exit penalties as well. 

Brendan


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## ClubMan (31 Jan 2008)

Cheese said:


> This was to be my pension


Why did you not invest at least some of the €50K in an actual pension that qualified for tax and _PRSI_/health contribution relief?


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## Calico (31 Jan 2008)

Delted post


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## askalot (1 Feb 2008)

As others have said it is best to stay invested; unless you need the money for a life saving operation now is not the time to sell!



Cheese said:


> I can manage without it for the next 4/5 years but I'm worried it will keep reducing and just dwindle away.



If this is your sole pension then it is usually good practice to reduce your exposure to equities as you approach retirement.


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## diarmuidc (1 Feb 2008)

I guess the advice to stick it out is a good one, however I would question the value in paying 1.2%pa management + possibly exit fees for that managed fund, considering that you can buy a UK Commercial Property ETF with [broken link removed]

However those sort of drops are not surprising considering what has happened the property (or equity) market since last January.


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## PMU (1 Feb 2008)

Rather than realising your losses, you should leave your current investment and consider investing in other assets classes that are not correlated with UK commercial property.
  Also, if this is to be your pension, why did you not, as another poster has pointed out, invest in an actual pension product and thereby qualify for tax relief? Did your financial adviser not explore this route with you?


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## galwegian44 (1 Feb 2008)

ClubMan said:


> Why did you not invest at least some of the €50K in an actual pension that qualified for tax and _PRSI_/health contribution relief?


 
With all due respect Clubman, this comment is not really helpful. I'm sure the guy feels bad enough already without having us tell him "Why didn't you......." in retrospect. Let's forget about that which we cannot change and focus on what he can do properly in the future. He's made a good first step by asking the advice of the knowledgeable people on this forum, hopefully he can move forward and regain the llost money in the long term.

Cheese, just for your own benefit I would recommend doing some research and costing the early encashment i.e. penalties etc so you know the full extent of your losses. I would then look for independent advice on whether to stay in your present fund or look to invest elsewhere. As others have said, this is a long term investment and the current financial climate will improve in the long term (although I do believe it will get worse before it gets better. Lastly, I would say that you should start to educate yourself on financial matters and learn about the various options available to you as far as investments etc. This forum is a super place to start as I have found out to my benefit.

Good luck and don't fret too much as this is just a down cycle that will eventually flatten out over time. Get as much advice as possible and don't do anything hasty.


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## ClubMan (1 Feb 2008)

galwegian44 said:


> With all due respect Clubman, this comment is not really helpful. I'm sure the guy feels bad enough already without having us tell him "Why didn't you......." in retrospect.


I'm asking a perfectly legitimate question as there may be a perfectly reasonable reason why this was not an or the best option in this specific case. Understanding the background to the case may help people to comment more usefully.


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## JR Rizzo (1 Feb 2008)

Cheese said:


> Hi All,
> In Jan 2007 I invested €50K with Standard Life in UK Commercial property, on a 5 year term, on my Financial Advisor's advice. He had said the bond was performing very well. Management Fees 1.2% p.a. I got my first statement today and I'm in shock - current value is €43K, surrender value €41. This was to be my pension but €7K is a huge loss. I can manage without it for the next 4/5 years but I'm worried it will keep reducing and just dwindle away. Panic has set in now and I'm wondering if I should cut my losses, withdraw the 41K and invest in something more reliable.
> 
> Can anyone give me some advice please.


 
what do you mean by "more reliable"?? get a more reliable "financial advisor" first!

sorry! but whoever "advised" you on this really didnt do it very well

I would say nearly everyone lost (some alot) on investments in 2007,
so you are not alone! but not everyone PAID professionals to LOSE THEIR MONEY!
there are probably many in worse positions than you
hiding under a big blanket, but at least you are being proactive.

its always debatable, but you may have got in "near top" of market
it may take a while to recover
and you may come out up at the end of 5 years

estimating time frames, you bought in when STERLING-EURO
was about .66, and its about .74 now,
*so at least half your LOSS will be FOREX based,*
but FOREX is part of "financial advice" and your FA should of highlighted
this RISK (???)

But you need to seriously get back to your "FA" and grill him/her over this!!!
What would you expect if you had advised someone and they lost 20%?

I've continually warned over the motives of these so-called
"professionals" -> most "financial advisors" are sales peolpe at the end of the day and who can blame them *as its how they make their money!*


all *investment advice *has to be taken in the context of your big 
picture:-

(for your own benefit) write down all reasons *why you made this decision *at the time - be honest!!!

*how old are you??*
- you sound like looking at retiring soon, if taking 5 year time horizon??!!

*have you a pension already?* - what is it in??

*what other investments, debts have you got??*
- I hope you are diversified a bit and didnt go all in (surely your FA wouldnt have let you "bet it all" on commerical property??)
- if you decided to invest all e50k you could have found a fund that
allowed you to stagger the buying of units (say every month or two), meaning you cost averages out over the time.

*how much do you know about UK commerical property market??*
- do you even live/work in UK? better to invest in things that are more local / familiar.
- are you familiar with FOREX movements?

*have you used this "financial advisor" previously??*
- how did you get in contact?

ask your "FA" what are costs of quitting fund now,
(and quitting your FA)

can you emotionally accept this loss and move on mentally
taking a fresh "new slate" with your investment decisions??!!
(just cause you lost 20% on property doesnt mean all you investment decisions will be bad)

JR.


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## galwegian44 (1 Feb 2008)

ClubMan said:


> I'm asking a perfectly legitimate question as there may be a perfectly reasonable reason why this was not an or the best option in this specific case. Understanding the background to the case may help people to comment more usefully.


 
Point taken Clubman, and a valid one. However, I feel for the guy and it's not easy to face up to such a loss so a bit more positivity on what he can do now and in the future would be appreciated by him I'm sure.

All the best.


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## Duke of Marmalade (1 Feb 2008)

_Boss_, we are told in the OP that the SV is 41K v 43K current value, i.e. 5% penalty.

One doesn't know the details but I would have a few questions about the original advice.

5 year term? Really? Or was it a recommendation to hold for at least 5 years?

The investment is down 14%. This is not a 1 in a million outcome, the currency movement alone could account for 10% of this. Was _Cheddar_ (can I use your first name?) advised that such negative outcomes were eminently possible at least in the short to medium term?

To answer the question as to whether to head for the exits, _Cheddar_ needs to ask a few supplementaries.

1. Is this mark-down due simply to devaluation of the underlying properties (including exchange rate), or is it due to moving to a bid basis?

2. If it is only a devaluation adjustment and not a move to bid basis - alarm bells ring for we know other similar funds have made such a move recently. Ask if there are any plans or any possibility of such a move in the near future?

3. If it is only a move to bid basis and no change in valuation then alarm bells ring even louder - for surely there should be a devaluation on exchange rate grounds if nothing else.

I agree broadly that one should be wary of panicing. All the same I believe these propery funds may not be written down sufficiently. There should be both a devaluation *and* a move to bid - nearer 25% for a non geared property fund IMHO.

The problem with property funds is that there is an awful lot of leeway in striking a price, and the natural tendency for companies when facing a massive write down is to undercut the initial slash and then slowly drip feed in the rest.

At least one company has thrown in the towel, faced with this dilemma, and deferred encashments entirely for at least 6 months.

And that is a further supplementary question:

4. Any possibility of encashments being suspended in the near future.

Getting back to the original advice, and presuming some of these supplementaries get negatives, was _Cheddar_ advised of the possibility of a move from offer to bid? Was she advised of the possibility of a suspension of encashment facilities?  Was she advised of the exchange rate risk, as is now required under the CPC?


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## Cobra (1 Feb 2008)

Hi Cheese, I have similar with Irish Life UK Property fund. (Down as well + fund is on six month hold from exit. But i will leave it there because i am confident enough they will come good . You must remember property funds are long term and i think by drawing out now , you will be at a fairly big loss, and who can tell the next investment , you could lose again. my advice is stay in. ( i had a similar investment as well some time back: same thing happened but stuck it out and after six years i was 7k up and then withdrew. Good luck.


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## z109 (1 Feb 2008)

tomjen said:


> Hi Cheese, I have similar with Irish Life UK Property fund. (Down as well + fund is on six month hold from exit. But i will leave it there because i am confident enough they will come good . You must remember property funds are long term and i think by drawing out now , you will be at a fairly big loss, and who can tell the next investment , you could lose again. my advice is stay in. ( i had a similar investment as well some time back: same thing happened but stuck it out and after six years i was 7k up and then withdrew. Good luck.


So after six years you had made, er, 14% (50k original + 7k up)?


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## Cobra (1 Feb 2008)

yoganmahew said:


> So after six years you had made, er, 14% (50k original + 7k up)?


 
Actually the above fund was irish comercial: 20k invested 7k up after dirt tax


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## z109 (1 Feb 2008)

tomjen said:


> Actually the above fund was irish comercial: 20k invested 7k up after dirt tax


Ah okay, so 35% after tax over six years.


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## Cheese (1 Feb 2008)

Hi Guys, Thank you all for your advice, and to answer a few questions -

.  The 50K is to supplement my pension, joined the pension scheme too late...will only have about 10 yrs pension + AVCs
 .  I know nothing about UK property, the FA, who was well recommended, said it was not so over-valued as Irish property, and was performing very well.
.  He didn't give any advice on a negative outcome, he didn't mention FOREX, which I am not familiar with.  

But can I do anything about his bad advice, or the Management Fees?  Do I have any comeback?

He promised to speak to Standard Life to find out what went so wrong, so I'll put Harchibald's comments to him when he rings.

Galwegian44 - I do appreciate your positivity, thanks.  I'll probably stick it out for the 5 yrs. and hopefully things will improve, as you and others advise.

Thanks again.


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## ClubMan (1 Feb 2008)

Cheese said:


> But can I do anything about his bad advice


What precisely did he say or write down that you consider misleading or potentially the basis for a mis-selling case if that's the angle?


> or the Management Fees?


Were these not set out in the original policy agreement/documentation which you presumably read and signed when taking out the policy?


> Do I have any comeback?


On what grounds precisely?


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## markowitzman (1 Feb 2008)

to clarify is this investment directly into your pension or not?
if not clubman's point is well made..........it is a no brainer that this should be in the pension to avail of tax relief.


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