Act now on mis-sold endowments: new article

treliac

[QUOTE=dunstonh;18490851
Why not take it to court then if you are that confident? I know you go on to mention costs but small claims doesnt cost much.[/QUOTE]


The Small Claims Court deals with cases to a value of less than £5,000.

mayb_2

You appear to be missing the point dunstonh - this is not about 'my case' or whether it is going to be taken to court. My case is finshed with. It is about whether the finance industry has been let off from facing up to the realities of what it had been up to. I think it has and I think it is doing it again.

In all cases it is the same hard hit people who are paying the cost and the same people getting the bonus payments despite their culpability.

In the end despite efforts of the FSA to protect them people have totally lost confidence in the banks and finance industry - this will cost them long term. This is not in the best interests of anybody.

dunstonh

It is about whether the finance industry has been let off from facing up to the realities of what it had been up to.

Seeing as the person that set up the review on pensions and had involvement in the endowment review has come out and said that too many people are paid redress that shouldnt have got it, I dont think you are being that objective.

The endowments issue was far greater than it should have been because of claims companies. They exploited the fact that record keeping was basically awful on old cases and they could get cases paid out with redress even when there were not mis-sales.

people have totally lost confidence in the banks and finance industry

People are driven by what the media tell them to feel. Confidence will return and in 5 years or so it will all be forgotten. Personally, if people have lost confidence in every area of financial services, it isnt showing at my end with investment business well up. Other IFAs are saying the same. The business levels and comments from consumers doesnt reflect what you are saying. Sure its easy to slag off the banks but most I speak to are not bitter about it.

treliac

dunstonh wrote: »

Seeing as the person that set up the review on pensions and had involvement in the endowment review has come out and said that too many people are paid redress that shouldnt have got it, I dont think you are being that objective.

The endowments issue was far greater than it should have been because of claims companies. They exploited the fact that record keeping was basically awful on old cases and they could get cases paid out with redress even when there were not mis-sales.

The assumption seems to be that all the people I know and who report on this board, who bought some sort of policy designed to pay off their mortgage and say they were not told there was any risk attached, are therefore lying.

People are driven by what the media tell them to feel. Confidence will return and in 5 years or so it will all be forgotten. Personally, if people have lost confidence in every area of financial services, it isnt showing at my end with investment business well up. Other IFAs are saying the same. The business levels and comments from consumers doesnt reflect what you are saying. Sure its easy to slag off the banks but most I speak to are not bitter about it.

It will only be forgotten once people have all forcibly been time-barred from making claims. I've no doubt that, even in this age of information, there are still those who don't realise their mortgage will not be paid up at the end of its term.

With respect, your investment business clients are going to be of a different financial station to the likes of us endowment/pension mortgage losers. We don't have money to invest, we're stuck with worrying about how we are going to pay our mortgages off.

dunstonh

The assumption seems to be that all the people I know and who report on this board, who bought some sort of policy designed to pay off their mortgage and say they were not told there was any risk attached, are therefore lying.

No, there were some mis-sold. However, the gates were effectively opened to allow and encourage mass claims by people who were not.

The problem with this thread is that whenever I make comments that try and provide a balance, its painted as if I am taking the extreme opposite view. You then get extremes taken and claims are false or all sales were bad. Mayb for example suggesting all sales should be treated as bad.

We know from claims figures that most payouts get lucky not because they are upheld but because documentation isnt up to scratch. Its about 10:1 (lucky:proven mis-sale). Now some of those could actually be mis-sales but many are because paperwork got destroyed, wasnt looked after and was lost or misfiled. Also, we know some providers are working to a quota system which pays out on cases which they really dont have to but have chosen to be seen to pay out close to the average.

With respect, your investment business clients are going to be of a different financial station to the likes of us endowment/pension mortgage losers. We don't have money to invest, we're stuck with worrying about how we are going to pay our mortgages off.

Fair comment, but again, I was referring to mayb who said people have lost confidence in banks and finance companies. Putting all firms and all people in the same pot.

mayb_2

Well dunstonh I can't find the word 'all' in my posts.

I would assume that your clients were advised by you on both the position of their endowments and of the banking crisis as they pay you to do so. I also assume that as you have said the markets lead the news and not the other way round, you were aware of and dealing with both of these scenarios.

Your customers are happy because you are looking after them and their investments. They would be paying you large amounts to do so and would not be doing this if you were not giving them good service in a difficult time.

It is not therefore, in your gift to make judgement on the rest of us. You lack empathy for those outside of your experience - that is not a criticism of the advice you offer for those who seek your help on here. You have not missold a mortgage yourself. Good on you and great for your customers.

It would appear to me that most of these endowments would be missales, dunstonh's world apart, as the sort of people that treliac and I refer to would have no knowledge of the stock market, stocks and shares, bonds, investment vehicles or any of the other names for the type of 'investment' they were sold. They were not intending to invest, but to pay off their mortgage and possibly combine that with a pension vehicle too. If you go back through the archives of the FSA you will find a Chairman's speach that agrees with what I have said about the numbers of missales. I have quoted it before on this forum in other threads about the misselling of mortgages in more recent times as we have had this discussion before.

Something the ombudsman service and others have failed consistently to take into account is the fact that there was no information out there for the average mortgage payer. We didn't have the stock market reported on the news in the depth that is covered now. We didn't have computers at work let alone at home. We didn't have radio money programmes or Martin's money tips or magazines to give advice on mortgages, consumer rights or anything else.

The balance of probability if paperwork either didn't exist, was mislaid or wrongly filed or not kept at all, is that the mortgage was missold. Let's face it some of it will have been conveniently mislaid because of that fact. It would appear that only accusations of misleading the Ombudsman by claimants are taken as possibilities, or in your case fact.

We went to people that offered mortgage advice and ended up investing on the stock market????? How were we supposed to know that if it wasn't explained and, I repeat, the sales people didn't know much more than we did in most cases? We didn't trawl through a whole lot of information on the internet and directly apply for the mortgage we fancied based on our financial accumen. We didn't search money supermarket or confused.com or read Martin's tips.

If what you are saying about the levels of knowledge that were held by people then, how do you explain the fact that not so long ago people bought mortgages which were going to rocket in cost beyond their abilities to pay two years later - the subprime market? What of those here who bought mortgages at 5 - 7 times their income? Who or what told them they could afford that - how many of them are still employed - why were they being offered at all? We know what we know now because of having our fingers burned with missold endowments. Lots of other people are still relying on the advice given to them by the salesforces of these banks and building societies. Remember why Northern Rock caught a cold - they sold to the subprime market.

Greed explains it all and it wasn't the greed of those trying to get a roof over their head and make it their home.

We didn't get 'lucky' when we were payed redress - not compensation as you so often point out dunstonh. We still had mortgages to pay and our repayments had to go up to cover the shortfalls. 'Lucky' is not how I feel with a fat mortgage to pay and no pension - this was not a lottery win, although the Ombudsman service is a lottery by all accounts.

dunstonh

Well dunstonh I can't find the word 'all' in my posts

You dont say some and the inference (as i see it) is all.

I would assume that your clients were advised by you on both the position of their endowments and of the banking crisis as they pay you to do so. I also assume that as you have said the markets lead the news and not the other way round, you were aware of and dealing with both of these scenarios.

No-one has a crystal ball. I do admit that I advised most to start going defensive before it happened but the scale of what happened took everyone by surprise.

It is not therefore, in your gift to make judgement on the rest of us. It is outside of your experience and something you will have read about and gathered information from using the internal grapevine and the news, financial reports and finance magazines. You have not missold a mortgage yourself. Good on you and great for your customers.

Contrary to popular belief and comments on this board, most advisers havent mis-sold a mortgage endowment. The FOS reported a while back that 80% of current advisers had never had a complaint. The FOS also said that media perception on quality of advice is does not match the facts. The focus on a minority gives an impression of majority.

It would appear to me that most of these endowments would be missales,

See what I mean, you are assuming most are when its not the case.

Something the ombudsman service and others have failed consistently to take into account is the fact that there was no information out there for the average mortgage payer. We didn't have the stock market reported on the news in the depth that is covered now. We didn't have computers at work let alone at home. We didn't have radio money programmes or Martin's money tips or magazines to give advice on mortgages, consumer rights or anything else.

If you did have those back then, then you would have still bought an endowment. The few consumer groups and media coverage back then were pro endowment. Which? used to recommend Standard Life as the best buy. Martin would have a section on which endowments to buy had he been around back then. Hindsight is wonderful.

The balance of probability if paperwork either didn't exist, was mislaid or wrongly filed or not kept at all, is that the mortgage was missold. Let's face it some of it will have been conveniently mislaid because of that fact. It would appear that only accusations of misleading the Ombudsman by claimants are taken as possibilities, or in your case fact.

I remember being told back in the 90s to destroy all files over 6 years old as they were not required to be kept. I also remember the state of the filing cupboard and the day when the lorry arrived to take the lot to warehouses. The documents were not looked after as once they were filed they were never required to look at again. I know from my own compliance dept that 10 times as many get redress due to missing docs or insufficient documentation. What we write nowadays in reports and factfinds is far more detailed than back then. I could look at plenty of valid sales and look at the documentation and know that on paper there isnt enough detail by todays standards.

If what you are saying about the levels of knowledge that were held by people then, how do you explain the fact that not so long ago people bought mortgages which were going to rocket in cost beyond their abilities to pay two years later - the subprime market?

You are now looking at a different classification of adviser. Mortgage advisers are light touch regulated and have lower qualifications and requirements. Even those only came in oct 2004. Investment authorisation isnt required by them.

The mortgage broker market historically was not one of providing advice but faciliting the request of the consumer. i.e. I want to borrow xyz and the mortgage broker tried their hardest to get it. So, there was a culture of the broker being required to do what they can to get the mortgage. Consumers considered a good mortgage broker as one that got them the mortgage they wanted. They considered ones that said you wont get it as bad mortgage brokers.

Greed explains it all and it wasn't the greed of those trying to get a roof over their head and make it their home.

You are right on the first part but you are blinkered to the fact that consumers were just to blame. Both with endowments and borrowing too much.

I have said it before, most of the endowments bought were done do so because it was the cheaper monthly payment. The risk or the potential lump sum wasnt the issue. Getting on the housing ladder at cheapest cost was.

The consumers wanting to buy a house beyond their means at all cost. Yes some brokers would act incorrectly but the consumer knew that and went along with that because they wanted it.

it takes two to tango. You cannot just point the finger at one group.

mayb_2

By stating that people just wanted to buy a house at cheapest cost you are agreeing that they did not want an investment but a home. What consumer would not want the best deal they could afford? This does not mean they were greedy or they understood the stock market and the fact that they were investing not just buying their house and pension.

With the sub prime market in America, people were targeted who were in debt and their mortgage and debts wrapped in a cheaper package. The brokers made sure they could afford it initially but failed to explain that unless the worker at vastly increased their income within a couple of years, the interest would rocket out of their reach. These mortgages were targeted at consumers least able to understand the implications of their purchase. This is known as soft fraud in America.

I cannot see mass fraud in the intentions of the consumers but the behaviour of banks and finance companies is being questioned on a daily basis??

The whole misselling issue revolves around the fact that consumers did not understand that their mortgages could fail to be paid. It is of no real help to receive redress as opposed to not have being in that position in the first place.

I cannot see why you believe people would cash in their mortgages in this way or purposefully buy something they could not afford. If they knew about the stock market issues they would not still have had these mortgages as they would have got rid of them in time themselves and known how to do that. We are not talking about anybody receiving huge payouts on this. Any money received has to go towards paying the mortgage or you put yourself in an even worse position. You also have to remortgage and that in itself is a costly exercise. So much effort for so little reward. Sales of these required little effort and reaped good commission payments for the salesman.

In all of this you forget the fact that the lump sums promised on completion of the term do not even come into the equation of redress as the amounts are impossible to prove. So you have a lot of people who half way or further into their term find they have not achieved anything at all and now time is not on their side to repay the mortgage and rearrange their pensions and savings plans. Why, why, why would anyone take that risk if they understood the implications and why would they not find out until this point had been reached? Balance of probabilities would suggest this whole thing was missold in general and those who dealt with people such as yourself were the exception not the rule.

You quote the FOS - I quote the FSA. The FOS has hardened its stance and the FSA has introduced the three year rule and neither of them have done this to protect the consumer.

treliac

dunstonh wrote: »

You are right on the first part but you are blinkered to the fact that consumers were just to blame. Both with endowments and borrowing too much.

I have said it before, most of the endowments bought were done do so because it was the cheaper monthly payment. The risk or the potential lump sum wasnt the issue. Getting on the housing ladder at cheapest cost was.

This is an assumption. I don't know about more recent purchases but I believe you would have been in your early teens when we bought our mortgage and I challenge your assumptions about the sales climate in the mid/late 80s.

Consumers of endowment/pension mortgages at the time, were, with maybe few exceptions, unaware of any potential for problems with the products they bought for the specific purpose of paying their mortgages. I just don't see how that can be contested now.

Given the lack of knowledge of the average house buyer (a first generation of house buyers in many families), they relied on the advice of product salesmen, as we now know them to be - at the time they 'dressed' themselves up as financial advisers.

If you were even offered two methods of paying for your home (and it wasn't in the interests of these salesmen to recommend repayment mortgages) - one might have appeared cheaper re. monthly costs (although I don't believe ours was in fact) - but it was full of promises to not only pay the mortgage but to provide a savings vehicle too, which would give benefits over and above a paid up mortgage. So, which would any buyer have opted for?

As for jumping on any claims bandwagon. It has only been very recently that we have learned of how disadvantaged we were and of our entitlement to claim redress. Clearly, anyone discovering the possibility and realising the extent of mistreatment of their finances that had gone on, would take the opportunity. I don't call that opportunism. The process is not that easy, despite people saying to follow the 'Which' site, or whatever. It is therefore easy to understand why so many have gone through claims companies who, without doubt, have milked the whole scenario for their own purposes.

In fact, our case has now reached its conclusion and I shall be posting on the other thread over the weekend.

dunstonh

By stating that people just wanted to buy a house at cheapest cost you are agreeing that they did not want an investment but a home. What consumer would not want the best deal they could afford?

Endowment mortgages were typically 5-10% cheaper per month than repayment. That was the driver. And seeing as no endowment had ever failed to pay a surplus, there was some complacency. The same complacency we saw with newbie mortgage buy to let landlords that thought property always went up and the markets take on risks that had been forgotten. That is human nature. The more risk you take and continue to get away with the less you perceive it as a risk.

The whole misselling issue revolves around the fact that consumers did not understand that their mortgages could fail to be paid. It is of no real help to receive redress as opposed to not have being in that position in the first place.

Which perhaps highlights that we should stop anyone with a low IQ buying a house.

I cannot see why you believe people would cash in their mortgages in this way or purposefully buy something they could not afford. If they knew about the stock market issues they would not still have had these mortgages as they would have got rid of them in time themselves and known how to do that. We are not talking about anybody receiving huge payouts on this. Any money received has to go towards paying the mortgage or you put yourself in an even worse position. You also have to remortgage and that in itself is a costly exercise.

Remortgage is not costly and people do it all the time to buy new deals. It costs between zero and £150 to switch between interest only and repayment and does not require a remortgage.

As for cashing in, people do it. You can spend all the time in the world talking about risk and potential for going down as well as up and you can get risk profilers signed where the client states they are happy to accept losses of x% p.a. in the goal of achieving long term growth. However, when one of those short term losses appears, you do get a minority who then back down on that and panic.

In all of this you forget the fact that the lump sums promised on completion of the term do not even come into the equation of redress as the amounts are impossible to prove.

The lump sum is effectively in the value of their house. Had the old economic scenarios continued that favoured the endowment, then house prices would be lower than they are now.

The heap debt fuelling economic growth with low inflation killed endowments but made things like house prices go up much higher. You cant get both.

You quote the FOS - I quote the FSA. The FOS has hardened its stance and the FSA has introduced the three year rule and neither of them have done this to protect the consumer.

No point quoting the FSA as they dont have much of a clue on these things. The FOS are the ones seeing the complaints and many compliance guidelines and requirements are set based on FOS complaint outcomes rather than FSA guidelines. There are a number of areas where FSA say one thing and the FOS say another.

A firm near me was one of 500 recently checked for pension recommendations by the FSA. None of the 3 FSA individuals held any advice qualifications and didnt have any practical understanding of the advice process or what is involved in running an advisory business. That doesnt inspire confidence at all.