Investec High 5 - Is There a Catch?

[timsk]

Hi folks,
If you lot out there in t2wland are anything like me, you have your trading account(s) and then you have a few pennies put to one side in some mind numbingly boring places - but relatively safe - earning next to nothing in interest. The minute you have found the latest 'best rate' and filled out the forms and opened an account, the bank or building society launches another product and the one you've got is downgraded. But you can't be arrrrrsed to go through the whole rigmarole again to switch to whoever is offering the latest best rate. It's just too boring. Cut to the chase Tim - what's your point? Well, on the face of it, this looks like the answer to my prayers:
Investec High 5
Is there a catch that I've overlooked? Anyone got any experience with this outfit? Feedback welcome!
Thanks and Happy New Year to one and all!
Tim.

 

[Dentalfloss]

tim..you have to transfer the money to a bank in nigeria first


ha ha ...just joking
looks good.i have told my wife about this one.she is in charge of the savings accounts

 

[Martinghoul]

Hi folks,
If you lot out there in t2wland are anything like me, you have your trading account(s) and then you have a few pennies put to one side in some mind numbingly boring places - but relatively safe - earning next to nothing in interest. The minute you have found the latest 'best rate' and filled out the forms and opened an account, the bank or building society launches another product and the one you've got is downgraded. But you can't be arrrrrsed to go through the whole rigmarole again to switch to whoever is offering the latest best rate. It's just too boring. Cut to the chase Tim - what's your point? Well, on the face of it, this looks like the answer to my prayers:
Investec High 5
Is there a catch that I've overlooked? Anyone got any experience with this outfit? Feedback welcome!
Thanks and Happy New Year to one and all!
Tim.

I (as well as a couple of colleagues) have had our money with them for a while now... They're a perfectly legit, relatively large South African bank. Moreover, they're part of the FSA scheme, so your 50k should be safe.

The only "catch" (and it's not a catch, 'cause it's stated explicitly) is that this is a notice account, i.e. you can't withdraw unless you warn them well in advance (smth like 90 days). In that sense, their rates don't look too far out compared to the fixed term offers from high street banks. Since I have been looking for a similar thing, I can tell you that the best instant access savings account deal I've found out there is the Lloyds 3% one.

 

[blancspa]

Investec , hmm I have seen that Zebra somwhere. Ah yeas, I know them from the sponsor siute a the Twickenham Rugby Stadium, they re official sponsor for English Rugby and they`re from Souht Africa. They drink plenty of Guiness and bitter, drink Vodka in pints and chew something called Biltong. I ve met their directors and they looked decent people.

 

[Gumping]

and chew something called Biltong.

I advise all to do likewise!

Interesting! Will look into this.....

 

[GammaJammer]

reputable shop (well, the guys I know who work there are solid anyway). It's a 'proper' bank.

 

[timsk]

Cheers for the feedback everyone.
What I didn't mention in the OP was that I was enquiring on behalf of mrs. timsk. So, if it all goes pear shaped, I'll pass on your respective details to her!

Tim.

 

[maiden22]

Tim,

There is absolutely nothing wrong with Investec at all. As others have said, it is a SA organisation (probably the most visible SA financial services firm). In the UK, they are probably better known as an asset management company - have a look at Alastair Mundy's Cautious Managed fund, a very good example.

Investec Bank is separate. It is a UK subsiduary, so as long as you only put in £50,000 (or £100,000 between the two of you) you are covered by the FSCS (this is the compensation scheme, the FSA is the regulator) just as much as you would be with Barclays, HSBC or Natwest.

Aside from that, there is no reason to be concerned about them. Whilst they do have a lower credit rating than some better-known banks, it is important to distinguish the various components of this. They score very well on hard financials, less so on (in my view less important) soft factors. The credit rating is investment grade in any case.

If you want long-term savings, you might want to have a look at some of their structured products. These normally run for between 3 and 5 years, and they offer some that are capital guaranteed in the same way as bank accounts - in extremis they would be covered by the FSCS. Some are not, so check carefully. Some products that guarantee to return capital depend upon the ability of the counterparty to do so - bad news if they were backed by Lehman's (this happened to some investors in NDF plans).

A couple of links you might find useful:

http://www.investecstructuredproducts.com/about_us.html

http://www.investecstructuredproducts.com/products.html

They have been around a long time, are highly reputable and in my experience good to do business with. I personally have no problem recommending them to clients.

 

[arabianights]

I've never seen a retail structured product that wasn't a total con...

 

[Martinghoul]

I've never seen a retail structured product that wasn't a total con...

100% pure unadulterated truth this is... I'd agree most wholeheartedly.

 

[maiden22]

I've never seen a retail structured product that wasn't a total con...

AN, I enjoy reading your posts but I'll have to respectfully disagree here. Albeit a little later, as oil is looking interesting at present.

Edit: OK, didn't trigger.

We sometimes use them where people wish to tie up their money for a while, want capital security, but also want better than they can get from the bank. In some ways, a sort of alternative to a longer-term cash deposit.

You could do something like a 3 year fixed-rate account (bond). You can get 4.5% AER from Derbyshire, 3.75% from Natwest, or 4.7% from ICICI (if you are willing to put money with a C rated institution and accept a no early closure term). Your money is safe (guaranteed by the deposit taker and the FSCS) and you will get the advertised return (or likely at least part of it, even in the event of collapse).

Alternatively, you could invest in an Investec FTSE 100 3 year plan. Your capital is guaranteed (by Investec and the FSCS) and you will recieve 18% at the end of the term, if the FTSE 100 is higher (by any amount) than it was at the start.

There is no more risk to your capital. There is an opportunity risk, although personally I think that it is small. The opportunity risk premium is the noticeably higher potential return, dependent only upon the FTSE standing even 1pt higher in 3 years than it does today. This seems like adequate compensation to me.

It is effectively an alternative to a fixed-term deposit, with equal security for your initial capital, a chance that you will receive a greater return and a chance that you will receive a smaller return.

Where is the con in this? I admit that they don't appeal greatly to me, but for someone who wishes to acheive a better return than cash with the same capital security it might well be an attractive product.

 

[maiden22]

Further to the above, there have certainly been some shockers in the past. This is largely due to poor labelling and marketing, which is misleading, and poor / dishonest sales techniques by banks, advisers and so on.

In fairness to the flog-it merchants (not that they it deserve much), structured products are complex and most salesmen / advisers did not understand them. Little excuse I agree, but I would simply point out that lapses in many cases may have been due as much to ignorance as they were to unprincipled greed or sales targets.

 

[arabianights]

AN, I enjoy reading your posts but I'll have to respectfully disagree here. Albeit a little later, as oil is looking interesting at present.

Edit: OK, didn't trigger.

We sometimes use them where people wish to tie up their money for a while, want capital security, but also want better than they can get from the bank. In some ways, a sort of alternative to a longer-term cash deposit.

You could do something like a 3 year fixed-rate account (bond). You can get 4.5% AER from Derbyshire, 3.75% from Natwest, or 4.7% from ICICI (if you are willing to put money with a C rated institution and accept a no early closure term). Your money is safe (guaranteed by the deposit taker and the FSCS) and you will get the advertised return (or likely at least part of it, even in the event of collapse).

Alternatively, you could invest in an Investec FTSE 100 3 year plan. Your capital is guaranteed (by Investec and the FSCS) and you will recieve 18% at the end of the term, if the FTSE 100 is higher (by any amount) than it was at the start.

There is no more risk to your capital. There is an opportunity risk, although personally I think that it is small. The opportunity risk premium is the noticeably higher potential return, dependent only upon the FTSE standing even 1pt higher in 3 years than it does today. This seems like adequate compensation to me.

It is effectively an alternative to a fixed-term deposit, with equal security for your initial capital, a chance that you will receive a greater return and a chance that you will receive a smaller return.

Where is the con in this? I admit that they don't appeal greatly to me, but for someone who wishes to acheive a better return than cash with the same capital security it might well be an attractive product.

The con is not that the product doesn't deliver what it says it does, it's just that it's massively overpriced for what it is.

They're derivatives for people who are too unsophisticated to price them, basically.

 

[maiden22]

The con is not that the product doesn't deliver what it says it does, it's just that it's massively overpriced for what it is.

They're derivatives for people who are too unsophisticated to price them, basically.

But how is that a con? Most people are not sophisticated enough to price derivatives correctly. Many people would not wish to risk their capital attempting to do so.

It is an alternative to a cash deposit. It offers attractive returns to both provider and punter, as well as capital security. They are not suitable for everyone or every purpose of course. However, I think it is wrong to call them a con. You might as well call car manufacturers a con - they charge a lot more than it costs them, and they are only for people who are too unsophisticated to build their own cars.

 

[arabianights]

But how is that a con? Most people are not sophisticated enough to price derivatives correctly. Many people would not wish to risk their capital attempting to do so.

It is an alternative to a cash deposit. It offers attractive returns to both provider and punter, as well as capital security. They are not suitable for everyone or every purpose of course. However, I think it is wrong to call them a con. You might as well call car manufacturers a con - they charge a lot more than it costs them, and they are only for people who are too unsophisticated to build their own cars.

Car manufacturers receive money in taking financial risk; while the marginal cost of production of any car is limited the tooling etc costs billions (I am perfectly capable of building my own car, incidentally).

That should also be the case for banks, and indeed it is for taking some risk with these products that they are paid. But they are being paid an absolutely astounding risk premium that they simply wouldn't be getting for a similar product marketed to someone savvy.

Assuming you're an IFA, why not explain how easy it is for someone to mimic that product (approximately) in their portfolio, or do it for them and collect some juicy fees... it'll still be a lot less than what the bank is charging.

 

[maiden22]

Car manufacturers receive money in taking financial risk; while the marginal cost of production of any car is limited the tooling etc costs billions (I am perfectly capable of building my own car, incidentally).

That should also be the case for banks, and indeed it is for taking some risk with these products that they are paid. But they are being paid an absolutely astounding risk premium that they simply wouldn't be getting for a similar product marketed to someone savvy.

Assuming you're an IFA, why not explain how easy it is for someone to mimic that product (approximately) in their portfolio, or do it for them and collect some juicy fees... it'll still be a lot less than what the bank is charging.

I agree that basically these are not complex, and could be relatively easily replicated.

Despite this, I'm not sure that the regulator would be overjoyed at the prospect of me assembling my own packages of loan notes and derivatives for retail clients!

But that is the point - these are for retail clients. They are simple, they do what they say (if you choose carefully). A typical investor is cautious, often retired, just looking for x pts better than cash. They may have fairly small amounts to invest, and they want to know that their money is secure. Regrettably, my guarantee does not carry the weight of Investec's, nor would the FSCS rush to assist should things go wrong . Mine could not not go into a cash ISA, and costs would be somewhat disproportionate for those that want to do £3,600 or £5,100 lol.

Horses for courses - as I said, personally I'm not wild about them. But if you're dealing with someone whose idea of long-term investment is their "high interest" ING account, they can be a realistic way of getting better returns.

 

[maiden22]

Oh, and yes - pretty much everything is less than what the bank is charging. Anyone fancy 7.5% upfront LOL ?

 

[arabianights]

Despite this, I'm not sure that the regulator would be overjoyed at the prospect of me assembling my own packages of loan notes and derivatives for retail clients!

Live life on the wild side

 

[GammaJammer]

You're paying a premium for the fact that i) you're dealing in retail amounts not institutional, and ii) Someone has done the legwork of packaging something to save you having to do it.

This is a very common thing in life, not just in finance, and I don't really have a problem with it.

So while I know what Arabian's saying, I don't think it's always a con. That said, there are still relative degrees of 'premium' you pay for this packaging. But as always, caveat emptor etc etc.....

 

[Martinghoul]

I think 'con' may not be the right word. I think these structured products are just 'mildly' mis-sold. I remember talking to an IFA who was puffing one of those FTSE-linked, principal-protected notes. One thing that jumped out was the amount of small print, caveats, provisos etc that came out of the woodwork when I started to ask questions arnd the initial pitch. I suppose it's just normal 'used car salesman' tactics and nothing to be shocked by, but I don't like it one bit.