I know that you have done your best to try to explain the misery that befell many of us when the banks were taken over by the Government. But some of us are remedial and still don’t quite understand where we now stand.
My late husband worked in AIB and had his life’s savings in AIB shares (and for safety he diversified into equally “safe” BOI shares!). I recall that, before the crash, his AIB shares were worth about €450,000.
They were held with Goodbody. I don’t know why.
My December 2024 statement states that, as of now, I have close to €25,000 invested roughly evenly across the two big banks.
Last month, I paid an annual charge of €701.61 to Goodbody (cumulative effect of costs and charges on returns), of which €501.61 was in non-Goodbody charges.
My questions are as follows:
- Should I close this account with Goodbody since I have never done – and don’t plan to do – any trading.
- Is there any point in hanging on to these shares in the hope that, when the banks are making millions again, they might feel sorry for those of us who lost everything and offer some kind of compensation?
In fairness, AIB continues to pay my widow’s pension.
Ms J.R.
The first rule in making sense of investments is understanding what you are paying for the opportunity of gain. Charges can fundamentally affect your return so it is important to get a proper fix on them.
I get the sense you’re not too sure why you are paying the amount you are paying Goodbody to manage this portfolio of shares and cash.
I’ve spoken to Goodbody, who, no more than their rivals, can be difficult to tie down on the question of fees. To their credit, they have suggested you contact them directly so that they can walk you through exactly what the charges are and for what service.
As usual, I have not given any of your identifying details to them as I did not have your explicit permission to do so but they tell me they have offered an experienced person on standby to deal with you directly on this matter. I’ll pass those details on to you.
Charges aside, there are a couple of big issues here. First, should you hold on to the shares? And second, should you continue to hold an account with Goodbody or any other broker?
Let’s take those in reverse order. You have kind of answered the second question with your assertion that since your husband died and you inherited these shares, you have never done – and do not plan to do – any trading.
There is no obligation to hold your shares through a broker although you will need to engage a broker should you ever decide to sell them.
These days, shares are “dematerialised”. This means that any paper share certificates you hold – which used to be the legal proof of ownership – are now worthless. Instead, details of your shareholdings are held in electronic form by the “registrar”, the company that manages the list of shareholders for each of these banks.
In this case, a company called Computershare is share registrar for both banks.
You can keep track of your shares and any dealings in them by registering with Computershare here for access to their online investor centre. You’ll need very basic details – your unique shareholder reference number for each shareholding – which you should be able to find on communications from the companies, or from Goodbody.
The key thing here is that you do not need to hold your shares through a stockbroker and, if you are not trading in shares, it makes little sense to be paying annual charges for the privilege – never mind more than €700.
Based on the current value of your account, as outlined in your query, the Goodbody annual charge amounts to more than 2.75 per cent, which certainly strikes me as very high, especially for an account with no activity.
I cannot think of an explanation Goodbody could provide that would make this a sensible proposition for you. Unless you plan to sell the shares now, given you already appear to be paying Goodbody for the service, I would pull the plug on the Goodbody account and keep track of the shares through the Computershare Investor Centre.
If you do want to sell later, you can always “shop the market” to see who will sell them for you at the lowest charge.
That brings us to the other issue – should you hold on to these shares at all?
As an AIB lifer, it is not entirely surprising – if not exactly sensible – that he invested heavily n the bank’s shares. Back then, he may have been able to do so at preferential rates or through some employee share programme.
He was correct that it made sense to diversify given the concentration of his investment. I have no idea if he took advice at that time but the notion of diversifying from having all your investments in one bank stock by investing in the State’s other large listed back was mad even back then.
All his eggs were still in the banking basket and we all know what happened there. People such as your husband saw their savings effectively go up in smoke.
In AIB’s case, quite apart from the bank bailout that saw the value of his shareholding crash, he also went through the one-for-250 share consolidation in 2015 that knocked a further 75 per cent of the value of his savings.
In the case of Bank of Ireland, in 2017, it gave shareholder one new share for every 30 previously held but, of course, it too saw the value of existing investors’ shareholdings decimated by the post-crash bailout.
Given the number of shares your husband held, and you now hold, in both banks, it is clear his investment in both was significant.
You do not say when you inherited these shares, which is a key point. Any investment gains (or in his case losses) die with a shareholder. So when you inherited the shares, their base value will be whatever they were worth at that time.
The losses your husband suffered are, unfortunately, irrelevant.
Assuming you inherited some time since late 2010, you are actually in profit on both those shares right now – albeit a long way off recovering the sort of level they traded at when your husband had them before the crash.
So if you do sell, and assuming your gain is more than €1,270, as I assume it will be, you will be paying capital gains tax at 33 per cent on those “profits”.
I’m not a share analyst, nor a qualified financial adviser, so I cannot say what you might expect these shares to do in the future, though it is fair to say that most analysts see some upside for both as the State has now exited their bailout investment despite cuts in European Central Bank interest rates that have padded their profits in recent years.
The bigger question is whether you are comfortable with stock market investments in individual shares. Even if you are, it would be advisable to consider proper diversification – something you might discuss with Goodbody when you meet them and before you make any decision to close that account.
Whatever you do, I would certainly not bank on either lender offering any compensation to the shareholders it gutted during the crash, now that they are back to earning millions of euro.
They may say how sorry they are for what happened – and have done – but they’re not that sorry. And, to be fair to them, that is the nature of stock market investment. It carries risk – hence the good sense in diversification – and when things go wrong, shareholders will find themselves at the bottom of the pecking order when it comes to people being taken care of.
That is the reality of shareholder investment. Investing in Ireland’s banks used to be considered almost as good as investing in government bonds, with dividend income as icing on the cake. The crash reminded us not to take such things for granted.
And much and all as investors must take responsibility for their own risk, I would not be giving AIB any credit for paying your widow’s pension. That is part of the Ts & Cs of your husband’s occupational pension scheme – not some munificence on the part of the bank.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com, with a contact phone number. This column is a reader service and is not intended to replace professional advice