Act now on mis-sold endowments: new article

mayb_2

Well that puts me in my place dunstonh doesn't it!

Crazy_Saver

Retired_I.F.A. wrote: »

Crazy Saver.... sorry luv but you have already admitted you decided to believe the salesman's verbal g-tee as to what the insurance company would provide rather than the written guarantee you read on the policy. If you get redress good for you but IMO you ought to carry some of the liability yourself.

Thanks for that Retired I.F.A.
A great vote of confidence for someone trying (albeit late in life) to understand how they got in this mess.

Can you truthfully say, hand on heart that when you were in your late teens/early twentys you had a full understanding of every problem, purchase, argument, relationship, government ruling, academic subject etc., etc.,.....I think you get my drift!

Or did you seek advice on one or two things and believe what you were told?

Had it been a subject that I was fully confident in, I would have had the experience, savvy and confidence to challenge the ideas put in front of me.

I didn't have a great knowledge of percentage interest rates or guaranteed investments. When the FA told me that many of the figures on the paper were just there because thay had to be I believed her. I had no reason not to believe her. Of course I wouldn't today!

When she sold us the endowment, she was probably the same age as I am now. I personally wouldn't dream of sending someone away today in the knowledge that I had mis-lead them but it's their fault for letting me! Actually, I wouldn't have done it then either.

dunstonh

ps Having just read the latest post. I think that it is troubling that IFA's deal in Medium and High end customers. I can understand that it is market forces, but I would imagine that low end income potential customers are the majority of the population. I just wish they would teach finance, and how to get by....in the schools, but that's another subject.

Let me give you some more things that will "trouble" you. (some is good)

The FSA have come out with proposals to make changes from 2009 called the retail distribution review.
1 - IFAs will require higher qualifications than current (thats good)
2 - Primary advisers (which will be the salesforces, like the banks) will have a more limited product range that has to fit certain criteria (charges not one of them) and be simplified.
3 - Primary advisers will not be able to use the title financial adviser
4 - If you take advice from the Primary adviser your options to complain to the FOS in the future will be almost fully removed.
5 - "Best advice from product range" is going to be replaced for Primary advisers with "better than doing nothing".
6 - IFAs will work on a fee basis only but can use commission to offset the fee which is agreed in advance.

The FSA admit that the proposals in the current form (which are still under consultation) will have consequences. The main one will see a reduction in the number of IFAs. With the average age of an IFA being 53, many are expected to call it a day rather than sit 5 more exams. Plus, many wont want to sit the exams and work on fee basis and will move into primary advice.

This will push IFAs even more to the higher net worth end. However, it should see the lower net worth end better catered for than currently. Salesforces are expected to focus back on the low net worth clients filling the role left by the old insurance agent. Whilst that method of distribution was more expensive, the products will not be as cheap so it can be factored in.

However, the middle net worth are expected to be worse off. If they see a Primary adviser, the product range is going to be more limited and not take account many of their needs. The mid net worth clients may not want to pay for advice explicitly (although with CAR that really shouldnt be a problem if correctly explained). The FSA have acknowledged this. Personally, I dont see it being an issue with the upper medium net worth clients as there will still be enough IFAs around to service them. The lower medium net worth are likely to be the big losers.

mayb_2

Well I for one have news for them - we wont be interested in any of it - twice bitten a life time shy.

walmergreen

Well, that sounds OK....ish. I would be concerned that the Primaries will probably only go through a 1 day product familiarisation training, and therefore not know a lot more than the finance savvy customer. ie We are talking about bank and building society front office staff in the branches?

However, what about the direct approach ie responding to advertising? I'm presuming that products will continue to be advertised in the Press, and increasingly via websites, without using either the IFA or indeed the Primary?

What sort of fees are the IFA's looking towards in the future? remembering that in my own area the professional fees are upwards of £100 per hour, and when you call out the photo copying chap he costs more Equally, the fee includes for premises, staff etc etc etc It would seem to me that you would have to deal with the big income earners, or see an awful lot of clients?
Cheers

dunstonh

Well, that sounds OK....ish. I would be concerned that the Primaries will probably only go through a 1 day product familiarisation training, and therefore not know a lot more than the finance savvy customer. ie We are talking about bank and building society front office staff in the branches?

The FSA say it will still require FPC3 standard (current standard or equivalent). However, the sales process will almost be flow chart style with the customer self certifying the outcome as being the right advice for them. Passing the exams is actually quite easy and you dont need all the exams to start selling things like life assurance. So, they could easily train up staff to sell a limited range of products and have staff at different levels.

However, what about the direct approach ie responding to advertising? I'm presuming that products will continue to be advertised in the Press, and increasingly via websites, without using either the IFA or indeed the Primary?

No different to present. However, it is still worth noting that this is not an efficient way to buy products. Most of the time the products are sold at full retail or very small discount that an IFA can beat easily (whether their business model is discounted or otherwise).

What sort of fees are the IFA's looking towards in the future? remembering that in my own area the professional fees are upwards of £100 per hour, and when you call out the photo copying chap he costs more Equally, the fee includes for premises, staff etc etc etc It would seem to me that you would have to deal with the big income earners, or see an awful lot of clients?

No expectation that fees will change. However, some will no doubt increase theirs as the increased qualifications will persuade some to increase their charges. Those that go the distance to chartered are likely to charge a lot more but because its fees, those with larger investments are likely to get much better value than those with smaller investments.

Personally, I dont see much difference. I already work to CAR (customer agreed remuneration) as do an increasing number of IFAs (estimated to be around a quarter presently). Agreeing the charge up front removes any accusation of bias and you can actually use commission differences to the advantage of the client (i.e. larger rebates).

mayb_2

I think overall it is far better to find out as much as you can for yourself - check out all the angles and make your own decision. That way you aren't paying anybody for a level of advice equivalent to this and who wont be held responsible for getting it wrong anyway. There are still a lot of people out there with no money and no provision for their old age and a new generation of spenders who have barely enough income to cover their debts.

Until sites like this one started to explain what is going on out there, people were relying on duff advice from sales people in banks and building societies not to mention call centres. That is those of us not considered worth advising by IFA's apparently, as we don't have enough money i.e. lower net worth - don't you just love that expression? It sounds to me as if these people are going to be legitimised as Primary advisers - the same thing in a different package and still no responsibility for the customer they are 'helping'.

As I said I wont be taken in by it and neither will a lot of people - just another set of smoke and mirrors to lead us into more trouble. The Ombudsman service would be cut down a lot though, as the financial services industry wont be held to account.

Crazy_Saver

Can someone clarify something for me please.

I've only got the posts on here to go by, but am I right in thinking that all FAs and IFAs have to pay into a central fund which pays out all compensation claims, and some of you feel that this is unfair as you have never had a complaint against you?

If so, isn't that similar to most insurances. I pay buildings insurance which always asks if we suffer from subsidence or flooding. We have never had subsidence and the hill that we live on the top of is so high that even Noah and his Arc would be safe here. No doubt my insurance company has had to pay out on claims for these issues but not to me!

I don't begrudge the people who have had these problems, surely that's life!

mayb_2

I think that is basically what is being said here Crazy Saver - it is akin to the public liability insurance that my husband had to pay as a self employed plumber. He never had to use it but he didn't mind paying it. It protected him too. Most of these things are considered to be part of the running costs within a business. This is not intended as a punitive thing. I believe I am right in thinking banks have to pay into a similar pot don't they to ensure that customer's money is not lost - oops no that is the government therefore taxpayers? There is something similar with travel agents so customers don't get stranded abroad (ABTA?), something is in place now for pensions that have failed to enable people to get something back - government again so taxpayer.

dreamylittledream

Crazy_Saver wrote: »

Can someone clarify something for me please.

I've only got the posts on here to go by, but am I right in thinking that all FAs and IFAs have to pay into a central fund which pays out all compensation claims, and some of you feel that this is unfair as you have never had a complaint against you?

If so, isn't that similar to most insurances. I pay buildings insurance which always asks if we suffer from subsidence or flooding. We have never had subsidence and the hill that we live on the top of is so high that even Noah and his Arc would be safe here. No doubt my insurance company has had to pay out on claims for these issues but not to me!

I don't begrudge the people who have had these problems, surely that's life!

Not exactly - what you are describing is the FSCS fund which all financial companies pay into.

It covers losses only if a company goes bust.

Mis-selling claims are settled either out of the IFA's own pocket or via separate PI insurance (which given the hefty excesses on this is effectively the same thing).

As such it is perhaps unsurprising that it is far tougher to get an IFA to uphold a complaint than a large insurance company accordingly...justified or otherwise.