Act now on mis-sold endowments: new article

defender_of_the_weak

Scotti

There is little you can do but wait with this one. Many advising companies, big and small have not only gone out of business, but also have closed today as ABC advisers ltd and opened tomorrow as ABC Finaancial Ltd. They take forward all the assets of the old business but do not acquire all the liabilities for past actions, thereby giving them a clean slate. The responsibility passes to the FSCS to pay any compensation due and charge the remaining advisers like dunston through the annual levy.

FSCS has been swamped but have now handed over a chunk of the donkey work to a third party outfit called Higham Group and timescales seem to be shortening, but still nearly a year or more.

Not really anything you can do but wait.

EdInvestor

alligator.crocodile wrote:

Gut feeling is that, to keep the money in equity based investments, we'd be better of taking the cash-in and re-investing the money in a share-based fund that is not with-profit.

Indeed so, not least because most With profits funds are less than half invested in equities anyway.WP funds also feature high charges.

I remember news reports about insurance, investment and pension companies offloading captial as extra-ordindary bonuses to shareholders because they were "over capitalised". (I think that was the term.)

Are you referring to the "contribution holidays" that many companies took from final salary pension funds in those days? This was partly because the shares were doing so well that if they made their contributions as well the pension fund would have too much money in it, thus falling foul of a Revenue rule designed to stop companies parking money in the pension fund and not paying tax on it. With hindsight this was a very silly rule.

Or do you mean something else?

alligator.crocodile

EdInvestor wrote:

Are you referring to the "contribution holidays" that many companies took from final salary pension funds in those days?

Thanks for the reply. No I wasn't referring to the contribution holidays - though that is another valid aspect. There were loads of news articles about companies in the financial sector selling off 'gilt' assets and making extraordinary "windfall"? bonus payments to shareholders.

I'm sure I didn't imagine this - perhaps it all happened whilst I was taking a shower~~~?

Al

silkyjanix

Can anyone advise whether I might have a case for mis-selling? We saw an independent financial adviser in 1986 and told him we wanted a repayment mortgage. This was set up in due course and we were none the wiser until seeing another ifa in 1989 over some other financial matters. He couldn't work out our monthly mortgage costs because the figures didn't add up - it seemed we weren't paying enough! When we investigated with the mortgage company they told us we had been sold an endowment mortgage. Of course, though, we hadn't set up an endowment policy because we thought we had a repayment mortgage.
Does this constitute a mis-selling? Oh yes, we were given all the chat about how brilliant endowment mortgages were, but didn't believe the figures, thought it all a bit too good to be true. We have now moved to a repayment mortgage because of the warnings of shortfall, but I have always wondered if there was a mis-selling here. Trouble is, I'm not sure we can prove anything.
Can anyone out there help?
Thanks very much!!!

dunstonh

1986 means no go. Its pre regulation.

silkyjanix

Thanks for that, dunstonh. At least I know now......

dstanden

I was mis-sold an endowment policy by a financial adviser, working for a building society and in turn for Norwich Union. He is no longer recognised by the FSA and we have heard stories that he left the company under a cloud.

We already had an endowment and did not want another. Since the market was depressed we had significant negative equity and could not afford the huge loss on the property, but children growing up forced us to move anyway.

We worked out the maths and decided to rent out the property, use the income to pay that mortgage and take on a second. I mean we were desperate, but the maths said that we could work it and a reliable estates manager looked after the rental.

Everybody we approached for a mortgage, even specialist lenders, told us the same - we did not earn enough to keep the existing property and buy another.

The we went to look at another property and loved it. We told the estate agent of our plan and he was only too happy to help. He told us of a buy-to-let mortgage with the Skipton building society. In 1998 these were unheard of, but he assured us that this was the best solution for us.

The only catch - According to the estate agent, this was only available as an endowment (a whopping great lie). Even though we didn't want another, he tried to lump in the existing endowment (breaks the rules of selling), he told us that it was guaranteed to pay off the mortgage at the end (another rule broken), he told us that there would be sufficient capital left over to pay for college education (another rule broken) and so the list of infringements went on.

Eventually with no other option - He said "it's endowment or nothing", we took up the offer and bought the house. Later it transpired that he had completed paperwork post-sale to say that all repayment methods had been discussed and that we were happy to proceed with endowment (another lie).

Our complaint was unsuccessful because a Norwich Union representative (other than the estate agent acting on their behalf) was not present at the time to witness the selling method and that the paperwork supported a legitimate sale. The balance of probability is that the salesman (who makes more commission selling an endowment) would not have broken the rules and done as we suggest to earn more money for himself - Yeah right!

The ombudsman agreed that whilst there was good cause to complain, we could not substantiate the sales method. Apparently hundreds of claims are rejected for similar reasons and we just have to put up with it.

I used one final argument that clarified the situation of paperwork versus salesman. I said that hypothetically I went into an electrical retail shop and told a salesman that I wanted a 5-CD changer. He showed me a model and sold one to me claiming that it was a 5-CD changer, when in fact it was a 3-CD model. I discover this when I open the box at home and return it to complain. On my printed receipt it says 3-CD changer. Was I mis-sold? The paperwork suggests that I got what I asked for and it is the salesman's word against mine.

I feel that I have exhausted all of my options, but feel aggrieved that this sort of thing happens to people and nobody can do anything about it.

Any suggestions gratefully received.

dunstonh

I used one final argument that clarified the situation of paperwork versus salesman. I said that hypothetically I went into an electrical retail shop and told a salesman that I wanted a 5-CD changer. He showed me a model and sold one to me claiming that it was a 5-CD changer, when in fact it was a 3-CD model. I discover this when I open the box at home and return it to complain. On my printed receipt it says 3-CD changer. Was I mis-sold? The paperwork suggests that I got what I asked for and it is the salesman's word against mine.

You get a shorter time from a retailer to do that than you do with a financial services product to change your mind.

There are four truths in these things. What you say, what the advisor say, what really happened and then how that is interpreted. The only really facts to be relied on is the paperwork issued at the time.

I feel that I have exhausted all of my options, but feel aggrieved that this sort of thing happens to people and nobody can do anything about it.

It works both ways. A lot of valid endowment sales are going through as mis-sales because consumers are now telling lies too. There are always winners and losers on both sides and often those "winning" shouldnt and those "losing" shouldnt.

December14

webwiz wrote:

A contrary view.
I find it hard to believe that anyone savvy enough to be interested in this site would really buy a low cost endowment believing that it guaranteed to pay off a mortgage. It was absolutely clear that the final payout amount was not specified at the start, so the blindingly obvious question that anybody with any senses would ask is "well what is the minimum?".

It might seem that it is a good thing for the "little man" if big insurance companies pay them compensation even if it is not really deserved, but this is not correct. The compensation will, in the final analysis, be paid by other little men through lower endowment proceeds, higher premiums, losses in pension funds holding the shares of the insurance companies.

Insurance companies are being forced to pay compensation if they cannot prove that they warned customers that the target amount was not guaranteed and few have good enough record keeping to be able to do that after many years.

I also find it iniquitous that cash compensation is being paid. Even if someone was really mis-sold an endowment to support a mortgage then their mortgage should be converted to a repayment type at the Insurance company's expense. Who really thinks that the recipients of the millions of compensation are using it to reduce their mortgages?

In answer to your question about how someone savvy enough to use this web site is able to complain about mis-selling of endowments I have to say I am. Never at any point during the 'sale' process were we as (I'll admit it) naive 19 year olds, were we advised that the 'funds' would not cover the mortgage. We were told categorically that the mortgage would be paid off.

A further clue is in the title of the policy..."with profits"... what is that if not additional funds payable to the policy holder after the mortgage is repaid.

As to who pays in the end ... if it means that companies mis-selling these products become more responsible and realise that they will be found out and compensation wil be given to those people, then that is the correct thing to happen. As the alternative that is being suggested is that the consumer is left unawares allowing more unwitting people to fall prey to these types of dealings.

I for one am doing my bit to ensure that my child is far more financially astute as a youngster by explaining and involving her in processes which affect her and without the benefit of the expertise and unbiased site of Martin's. Without the site I would still be languishing in ignorance as would subsequent generations.

silvercar

Started an endowment in summer 1988 through a limited company that was dissolved in 1989 according to companies house. The directors of the company are either working elsewhere or retired but are contactable. I understand that I should take a mis-selling complaint to the FCSC. My question is will there be any comeback for the directors? will they be chased for information or compensation? will a succesful complaint rebound on them in any way?