Act now on mis-sold endowments: new article

Crazy_Saver

Originally posted by mayb
I have everthing crossed for you. You will post the result here wont you?

No worries there mayb. If I win, I'll be shouting it from the rooftops:D

heather8

Thanks for the reply.

I've had all the paperwork out and it gives projections at different levels. The policy does quote that it will repay the loan at 9%. L&G will review it every 2 years and let us know how it is doing. I believe at the time we took it out, 9% growth was an average and the FSA now ask financial institutions to give lower terms of growth.

We have had 2 warning letters from them. The last one being in June 2006.

The pep was taken out in sept 2007 and was converted to an ISA when the rules changed automatically by L&G. The policy was sold to us by an independant financial advisor.

It was taken out for 20 years, i.e, we were due to have made enough money on the policy to pay off the 58,000 on the mortgage.

The last summary statement issued on 2/09/06 shows 425 untils held in the UK index (Pep). 4500 units held in the UK index (ISA) 368 units held in the worldwide trust (PEP) and 4012 units held in the worldwide trust (ISA). Hope this makes sense. The policy seems to be split 50:50 between the UK stock market and the worldwide trust.

The red letter shows. 5% growth 39800, 7% 47300 9% 56100.

L&G's view is that 7% growth is a reasonable assumption for the rate of long-term future investment growth.

Could you also give more information about switching on-line to another ISA. Sorry, but as you can probably tell, I'm very good with finanical things.

mayb_2

I don't know what the general experience is here for claims that go to the Ombudsman but mine was months and months and months. I would have to check but I think the basic process took over 6 months. Can anyone let us know what their experience was time wise? What is normal and should you/can you chase this up if it goes over a certain period of time.

By the way, (and maybe everyone knows the answer to this already) can you stop paying the endowment and rearrange your mortgage if you have an outstanding claim with the Ombudsman?
It may sound a bit of an obvious question but we carried on paying an Endowment for over a year after we had made a complaint, because we thought we had to whilst it went through the complaint process. This was not a mortgage thing but we were told we could have made the complaint after cancelling the policy without it having any effect on the process.

Would that be a wise decision to take on a mortgage before knowing whether you were going to win your case or not?

dunstonh

Do you not agree that any sort of investment fund could go wrong again before pay day and that there is not a way of avoiding that possibility? Its a bit like gambling only use what you can afford to lose!

Modern investing techniques mean you should never invest in just one fund. You spread it around. Plus you can switch out of a fund in minutes if you want using online switching.

I've had all the paperwork out and it gives projections at different levels. The policy does quote that it will repay the loan at 9%. L&G will review it every 2 years and let us know how it is doing. I believe at the time we took it out, 9% growth was an average and the FSA now ask financial institutions to give lower terms of growth.

Target growth rate of 9% is high. The ones I have running assumed 5%. I would rather target lower and come in higher than the other way round.

I believe at the time we took it out, 9% growth was an average and the FSA now ask financial institutions to give lower terms of growth.

I cannot recall the change date but I am sure by 1997, the figures were 5,7 & 9% and you would have expected 7%. Advisers do get the choice to amend the target growth rate though.

The last summary statement issued on 2/09/06 shows 425 untils held in the UK index (Pep). 4500 units held in the UK index (ISA) 368 units held in the worldwide trust (PEP) and 4012 units held in the worldwide trust (ISA). Hope this makes sense. The policy seems to be split 50:50 between the UK stock market and the worldwide trust.

The funds have been performing in excess of 9% since the crash but I wouldnt want to rely on those funds to get 9% at the end. It is possible to achieve it but you would increase the odds by having a better fund spread and lower charges.

Could you also give more information about switching on-line to another ISA. Sorry, but as you can probably tell, I'm very good with finanical things.

Although the transaction to do this is a doddle (two sides of A4 on a quick application takes care of it), you need to know the investment funds you want to go into and make sure the risk and potential of the funds matches your requirements. If you dont feel ready to do that yet, then you should seek advice from an IFA. Now I know you wont be happy with the one you have seen but there are some very good ones out there and most of the bad ones have gone in the last 5-10 years. Ask if friends have an IFA they use (not tied advisers, like those from the banks or insurance companies). Word of mouth is a good way to find someone (of any trade).

Crazy_Saver

Originally posted by dunstonh
Modern investing techniques mean you should never invest in just one fund. You spread it around. Plus you can switch out of a fund in minutes if you want using online switching.

Hi dustonh.

My endowment is a with profits policy that is failing fast-hence the current claim. What I don't understand is , if it is as easy as you point out, why didn't Eagle Star re-arrange my investment on my behalf?

dunstonh

My endowment is a with profits policy that is failing fast-hence the current claim. What I don't understand is , if it is as easy as you point out, why didn't Eagle Star re-arrange my investment on my behalf?

They cant. Unit linked investments such as unit trusts, you own the units. The value of the units can go down as well as up. With a with profits fund, the insurance company owns the money and you are investing in the profits that the insurance company can generate. If the insurance company goes under, your money goes with it (ignore FSCS for now).

So, the insurance companies have to invest with financial solvency being the priority. With the revised accountancy standards, the FSA increasing the solvency requirements and the stockmarket crash, a number of insurance companies came very close to going insolvent. Indeed, some did for a short period. To make sure they didnt go under, they reduced their risk and sold up a lot of the equities whilst the market was low. This means they cut the losses but didnt benefit from the gains when the market recovered. So, whilst those in modern unit linked investments would have seen 60-100% gains over the last 5 years, the weak insurance companies with profits funds havent.

So, currently you have the weaker WP funds returning around 5% before charges. Many are 90:10 funds so you see 0.5% disappear there. Then you have admin and charges (and as these are old contracts) lets take 2% off, then lets put another 1% aside for the reserves to build up what was lost and cover future guarantees and you are left with around 0.5% to give a bonus.

With unit linked funds you have much greater control and can be in charge of your investments. Much of that flexibility has come with computers and technology. WP funds (and the products that used them) were mostly designed when that sort of flexibility was but a dream to anyone other than institutional investors or high net worth individuals.

mayb_2

Meanwhile Crazy Saver - mugs like you and me must lose out to ensure that the the weak insurance companies do not go under by becoming insolvent and to do this they have the full and unconditional support of the FSA.

Woops am I back on that bandwagon again! I wish I had the space here to give you all of the gen on the FSA and CIS saga it is mind boggling the lengths the FSA are prepared to go to to protect them.

renmure

Hope I have posted this in the right bit and apologise for the length.
I believe I was missold 2 Standard Life policies, one in 1990 which was taken out in association with a first mortgage, the second in 1992 which was taken out after I moved to another house and required a larger mortgage.

As background: In my case the advice was given, in 1990 and 1992, by a firm of solicitors (in Scotland) who were handling the conveyancing in both cases. The Firm employed an 'Investment Manager' whose roll was identified by the conveyancing solicitor as being responsible for effectively advising on the various financial products/mortgages available. The solicitor made arrangements for me to meet this advisor at the Firms offices and it was there, and by the financial advisor, that the discussion/assessment/guidence and advice was given which led, in 1990, to me taking out the Standard Life Policy. The solicitor was not present at this meeting.

When I contacted the solicitor in 1992 to request they act for me in the conveyancing relating to my house move, she noted that I would require and extra £15k mortgage and wrote to me saying that she should make arrangements for me to meet the same employed advisor in order to take out another endowment to cover the extra borrowing and this is what happened.

In raising my miselling complaint I wrote to the Firm of solicitors using the letter generator on the WHICH website. They responded within a week saying that they had a single file note from 1990 by the now-retired conveyancing solicitor which stated "attended client meeting, advised re mortgage options and life policies," and that they concluded I had been appropriately advised and had no grounds for complaint. Now, I know for a fact that she gave no advice and referred me to the Firms own advisor, which was hardly surprising, and that she was not in attendance when I met with the advisor, which is again hardly surprising. I wrote again asking for clarification as to whenther they were saying that the solicitor advised me or whether the solicitor had (as indeed she had) organised a meeting at which I was given advice. I also requested copies of any papers or information recorded by the financial advisor (he did a financial profile type questionaire etc) relating to both my meeting with him in 1990 and 1992.

The reply I just received states that since the file note in 1990 leads them to believe that the solicitor gave the advice then according to them the solicitor was an experienced conveyancing solicitor and therefor qualified to give such advice and that the advice given was appropriate and that my claim is unsuccessful and that they have no more to add. They make no reference to my request for a copy of the financial questionaire or the fact that I stated quite clearly that I was advised, not by the solicitor but by the employed advisor. They made no reference or comment to anything to do with my being advised in 1992 to take out an additional endowment and no acknowledgement of my request for a copy of any information they hold relating to the meetings in both 1990 and 1992 with the advisor.

I believe in my case I need to raise the issue with the Law Society for Scotland. I would welcome any advise as to how best I go about this. It seems completely absurd situation. I wish to raise a complaint relating to the fact that I was effectively sold endowments by the paid advisor of a large firm of solicitors on the basis that they would pay off my mortgage plus provide a certain excess sum. Yet when I raise a misselling complaint I am told that a 9 word file note written by the conveyancing solicitor, who was not in attendance when I met with the advisor, said I had been advised and that the advice was appropriate and that is that!

Advice and guidence gratefully received.
Jim

edited to add.. I believe the Law Society for Scotland regulates in this type of case.

mayb_2

I don't know anything about the differences in Scottish Law and assume that you cannot take this to the Ombudsman but must go to the Law Society?

Just a few thoughts.

You cannot claim about the poor performance of an Endowment if you knew what you were buying at the time.

Do you have any paperwork from the time of the sale - particularly anything relating to the amount you were promised - without proof of the excess sum this would be discounted by the Ombudsman. However, the question of whether you were miss sold hinges on whether you knew that you were investing in a product that may or may not perform well enough to meet your target. Did you understand there was a risk attached with this product?

If you were given any literature illustrating this it would not necessarily be sufficient on its own. It should also be backed up by notes made at the meeting with the advisor based on questions you were asked at the time assessing your attitude to risk etc. This is sometimes called a Fact Find and sometimes other similar titles but without it nobody can show with certainty that you knew what you were doing.

If the solicitor has failed to supply you with the documents you have asked for it begs the question as to whether they exist.

This would normally be a case for the Ombudsman if you were not happy with the handling of your complaint. Your solicitor should have sent you details of where to go and how to pursue your claim. Is this so very different in Scotland?

renmure

mayb wrote:

I don't know anything about the differences in Scottish Law and assume that you cannot take this to the Ombudsman but must go to the Law Society?

Just a few thoughts.

You cannot claim about the poor performance of an Endowment if you knew what you were buying at the time.

Thanks for taking the time to reply. I appreciate what you are saying in relation to the performance of the endowment(s). However, they were each sold to me on the basis that (a) they would pay off my mortgage at the end of the term and (b) I would be the beneficiary of a sum of money paid out in excess of the amount needed to repay the mortgage. The advisor illustrated this by making reference to whether the excess would pay for a good holiday or even a car. To my genuine belief, no mention or reference was made to the possibility of the endowment not actually paying off the mortgage.

If I had been sent a copy of fact-finding papers/forms/questionairs etc which showed that it had been explained to me that the risk of not paying off the mortgage was a possibility then I would accept that and move on. My request for copys of the advisors meeting notes was to confirm that I had not been advised of these risks. I did not ask for a copy of meeting notes between the solicitor and I (relating to mortgages/life insurance etc) since no such meeting took place, either in 1990 or 1992. Other than the various letters about the conveyanceing I dont have any communication or illustration relating to the endowment(s).

I suppose I am asking advice for an acceptable and standard form of words whereby I can legitimately request the Firm of solicitors/financial advisor to provide me with a copy of the information they gatherered at the financial 'fact-finding and advice' meetings between myself and the Firms advisor in 1990 and 92 which formed the basis of me taking out the policies. If they show (as I am confident that the will not) that I was made aware of the risks, both in 1990 and 92, and should have taken these risks into account then I shall accept that. However, I have effectively been told that because the conveyancing solicitor made a file note in 1990 stating I had been advised about mortgage options (presumably in the meeting which she was not in attendance) then that is that!

I assume I am entitled to ask for a copy of the advisors notes/questionaire etc? I had also assumed that if it showed me to have been advised appropriately then it would have been the first thing they sent me. I obviously assumed that the Firm would refer to their advisor and refer to his notes since it was with him that both meetings took place. Even if the solicitor was the most experienced conveyancing solicitor on earth and had advised someone (not me, but hypothetically) about which mortgage product to take out then surely there would have to be some form of paper trail to show how this had been done and not a simple file note stating that it had been done.

Thanks again for the input,
Jim