It’s the last day of 2017 and a time to look back at the last three months. The small picture is a series of events that have led to a general awareness that something very wrong was going on in Port Talbot and elsewhere during BSPS’ Time to Choose. Re-reading my and other’s blogs over the period, I realise that we may have missed something which was evident to us (as financial people) but not to members (who may not be).

The following chart is accurate. It shows the impact of “intermediation”; intermediation is the business of the middleman, or in the case of some of the investments we look for the many middlemen.

I know that the title of the table isn’t very catchy, but think of these numbers as how much your money loses because of middlemen and you can see that over a typical 55 year olds life expectancy (30 years) , a low charging fund (my money is invested at 0.25%) will shed 7.2% of its value while a high charging fund (for instance the Vega Algorithm fund you invest into through Active Wealth Management), would lose 58.8%.

If you have transfer your money into my fund (or the TATA workplace pension fund), then expect to lose £36,000 to intermediaries, invest in Vega and expect to lose £294,000.

The choice is yours – or is it?

This wasn’t disclosed

Nobody I spoke to who used “wealth management” such as the Vega Algorithms, had any idea what they were paying or what they were getting for the money. We have looked into both and can confirm that you will be paying at least 3% pa on your investments if you enter Vega using the more expensive share classes (which most appear former BSPS members appear to be in).

Last year the UK stock market made a return of 7.1%, it was considered a good year for investors. But if you are paying 3% pa, then half of your investment return has gone to the middlemen. And this is before we consider the huge impact of the initial fees that would last year have seen your fund go down even though the market went up.

Not only were you not told about the cost of investing into Vega, you weren’t told that you could have invested into the TATA workplace pension , or whatever workplace pension you are now in, at a fraction of the cost. These transfers could get you equivalent deals with self invested personal pensions managed by reputable advisers. There are no shortage of good deals in the market.

This wasn’t explained

In order to make up for the 3% pa taken as business as usual (and the 7%) extra-ordinary costs on the fund when you start out, you need to beat the market.

You can only beat the market by taking risk, but you weren’t taking on the markets, most of you were investing in the “Ultra Conservative Portfolio”.

Actually , the Vega Algorithms Portfolio you were investing in was buying into other funds which had investment targets that were typically no more than inflation + 3% (6% at the moment). So rather than getting something close to the stock market return, you would have got last year no return at all – in fact a negative return. You could have put your money in the bank and got a better return.

It should have been explained to you that putting your money in the bank is not a good idea, well not for long term investment, but putting your money into Vega is like using a “guaranteed loss account”. Nobody would invest into such a thing, if this was explained to them, the point is, Vega was not explained.

You never had the choice

What makes me and Al and Frank Field and everyone else so flipping angry is that you put your trust in us and we (the advisors) have let you down so completely. Now you know why Al set up Chive and gave up his time. He was so angry that he was prepared to work for nothing to put distance between himself and the rubbish advice being meted out by the sausage and chips merchants.

You – Port Talbot steel men – had no choice and this is not because Celtic and Active were in your face, but because no-one was there to give you another view. I spoke with Ray Adams of Niche,  in November and by then he had already pulled out. It takes one of Ray’s advisers 25 hours – the best part of a week – to properly advise on a transfer – and Ray has only 7 qualified transfer analysts. He had to stop taking on new business to make sure he treated his existing customers fairly.

Somewhere around 15,000 transfers will be requested before the BSPS window is closed in March, nobody- not the Trustees, not the FCA, not the good advisers – recognised the demand to get out. But Celtic and Active and other firms who came down from the north saw their opportunity. You did not have a choice because nobody foresaw what was happening and when it happened, nobody was there to stop it.

Al is working throughout the holiday period helping people who have decided to transfer to get their decision executed. TPAS is doing what it can to provide support to those in limbo after the with drawl of many advisers. There is a mobilisation of resource to help the many people who still don’t know where they will be on March 29th.

We’re not going to let this happen to you.

But the most urgent job is to help people who have transferred already.

If you find yourself in a fund where you are paying 2% or more a year for “intermediation” then you are paying well more than I am. If your adviser can first disclose what you are really paying and explain what you are getting for this cost- and if you are happy with that explanation – then no problem.

But if you hadn’t had this explained, and you can’t see what you are getting for your money, then you should be getting help.

Over the next few months, you will be able to read about the practical steps that the Communication Workers Union are taking for the staff of Royal Mail (ask your postman!). You’ll be able to read about what those who work in universities are negotiating with their employers and I hope you’ll be able to me and my friends (like Al) about what is to be done in Port Talbot and elsewhere.

It is not good enough to point out that a wrong has been done. It is necessary that the wrong is put right. There is indignation throughout the financial services industry at what the press call “the feeding frenzy” that has happened in South Wales and in other parts of the country. But that indignation means nothing if people who have been put in funds like Vega aren’t given the chance to get out on proper terms,

The reason is because experts know the numbers in the table at the top and understand what they mean for your long-term financial futures. Trust me, we are not going to shut up and go home. We will be staying angry for a long time to come.

If you are interested in understanding investment and the reason why charges matter, you might like to take 7 minutes out of your day to watch (or listen) to this video. It clearly explains the message in the table and why it is so hard to ever make investment fees up – once paid.