Act now on mis-sold endowments: new article

dunstonh

Borrowing = home loans. It was August 2006 when the ratio of mortgage cost to income passed the previous high set in 1991. 5 times lending was achievable then and has been achievable for many years. Many lenders dont even go by mutliples any more and havent for a good long time. Many of us were surprised over the media coverage Abbey got when it announced it was moving to 5x. However, it turned out to be a good advert for them so perhaps that is why they made the 5x announcement formal rather than something that happened but wasnt talked about.

Consumer greed is often referred to in your posts whether it be house prices or buy to lets, but rarely the commission greedy salesman at the bottom of many a missold endowment policy. As you keep reminding me dunstonh there are two sides to every story.

There almost certainly were and there still are today. Advisers are someone elses consumer. However, I just take issue with you on your comments that advisers was fraud and that the consumer was all innocent and light.

I worked with a number of advisers whose business was nearly all mortgages and they werent doing it with malice. They firmly believed they were doing the right thing. Insurance companies, the media, consumer groups were all saying how good endowments were. Parents were telling their children to get endowments as theirs had paid out big surpluses. It had a momentum as it had always done well (this is why I compare it to buy to let property which is currently in exactly the same position). There was an ingrained belief that they would pay out surpluses. And like many bubbles that go onto burst, not many see it coming. It just happens and some refuse to see it and carry on. In my eyes, its the latter that are perhaps the worst offenders.

Crazy_Saver

Originally posted by dunstonh
I am not supporting the endowment as a good product or that there were not mis-sales. However, I am not accepting your comments that people selling them were commiting fraud and the that the average consumer was so stupid that they didnt know that it was linked to investments.

As much as I respect and on most occasions, agree, with your opinions Dunston, I'm not convinced that this one is completely fair. I feel that when we took out our endowment in 1991, my husband and I would have been classed as "average consumers" - we were in our late 20s, about to get married, both in full time employment, no debts or loans to worry about and had both had a decent education.

But, I can honestly say, we were not aware that our policy was linked to investments and we had no idea that there was any risk attached to our endowment policy. I suppose the reason we didn't know this was because we never asked! We went along with the advisor because in our eyes she was the professional and we had no idea about mortgages. So according to your quote, we were stupid:(

I prefer to think of us as naive;)

mayb_2

Hi Crazy Saver

I had been looking for you in the Report Endowment Success thread. No wonder you are not there. How much longer can this take! I do hope they get to it soon and I do hope they give it proper attention too.

mayb_2

I

am not supporting the endowment as a good product or that there were not mis-sales. However, I am not accepting your comments that people selling them were commiting fraud and the that the average consumer was so stupid that they didnt know that it was linked to investments

.

People who knew that their mortgage endowment was linked to investments could not claim that they were missold their mortgage endowment.

The following is a quote from Martin on the Money Saving Expert article on missold endowments.

The promise was broken for many people. Millions have now ended up with a shortfall, meaning not only do you not get a lump sum, but the end result is the investment isn’t even enough to pay off the mortgage it was intended to.

My view is the financial services industry is culpable for this problem. Endowments paid large commissions to advisers. They weren’t transparent. Worse still, to make them look cheaper than repayment mortgages, the payment amounts were often set up at a low level, hoping for unrealistically big investment returns.

I think this probably sums up the situation for me quite well and by the sound of things for CrazySaver too. I expect a lot of us feel quite stupid now that we trusted someone to give us good advice because they called themselves financial advisors. No one is accusing them of malice and I didn't say they were all fraudulent - I did say that in any other world some of the actions of these salesmen would be considered as fraudulent. If they knowingly mislead the buyer then this is fraud and in the later years many of these advisiors knew that the endowments they were selling would not perform, but they were concentrating on their commission.

I have noticed dunstonh that you have been reminding people of the terminal bonus that is payable at the end of an endowment. Now might be a good time to mention that this is in no way gauranteed. The CIS for instance announced that this would probably be set at nil for them for their long term investment fund, a couple of years ago - that means no terminal bonus. They do not have to pass this information on directly to those who will be affected. There is no way that anyone can make assumptions that an endowment will perform in a certain way in the future and anyone holding on to theirs to pay their mortgage is taking a chance on that. If you choose to rearrange your mortgage and hold onto the endowment for other reasons presumably by this stage you are aware that these may not perform.

I do think you should clearly include these sort of warnings when you are giving advice dunstonh.

The buy to let situation does not fit into this argument at all. You have to be able to borrow the money as a mortgage or have cash to play with. They are not paying commission to anyone else - the deal is transparent and house prices will probably continue to rise in the long term- therefore good investment for pensions etc in the future. No real place for the financial services industry here though. Buy a house let it out to cover the mortgage with change if you are lucky. Sell it on in 20 years - take the profit.

The financial services industry is taking a big hit if the 'millions' of people mentioned by Martin receive their redress as they should - hence the time bar - have to put a stop to this drain. This has backfired a bit because many people are now submitting their last minute claims all at once - hence the backlog of cases experienced by the Ombudsman.

The financial industry could have kept more consumer confidence and had more investors if they had behaved in a more ethical manner when dealing with this whole situation.

Long live the ISA.

dunstonh

I have noticed dunstonh that you have been reminding people of the terminal bonus that is payable at the end of an endowment. Now might be a good time to mention that this is in no way gauranteed. The CIS for instance announced that this would probably be set at nil for them for their long term investment fund, a couple of years ago - that means no terminal bonus.

You may have noticed that it only gets mentioned on the companies that have a good enough investment fund to build up a terminal bonus. CIS is an awful with profits fund. It was never a good investment.

I do think you should clearly include these sort of warnings when you are giving advice dunstonh.

No advice is given on these forums by anyone.

The buy to let situation does not fit into this argument at all. You have to be able to borrow the money as a mortgage or have cash to play with.

Of course it does. It is using borrowed money to invest. The endowment was using borrowed money to invest. The only difference is one was a lump sum purchase and the other on a monthly basis.

They are not paying commission to anyone else - the deal is transparent and house prices will probably continue to rise in the long term- therefore good investment for pensions etc in the future. No real place for the financial services industry here though. Buy a house let it out to cover the mortgage with change if you are lucky. Sell it on in 20 years - take the profit.

So, with a buy to let mortgage, no-one is making any money out of it other than the consumer? The mortgage adviser setting up the mortgage? the estate agent selling the property? the solicitor doing the legals? the lender getting the interest? There is far more commission/fees paid on buy to lets than any endowment.

And look, you have fallen into the complacency trap that was exactly the same as endowments. "and house prices will probably continue to rise in the long term- therefore good investment ". That is exactly the view that was in place with endowments. This is why the media and consumer associations were telling people to take out endowments. Just as they have with buy to lets in the last few years.

mayb_2

dunstonh it would appear that you are the only person posting 'advice' on this board at the moment. The balance of that 'advice' is that people are better off now even if their mortgage endowment is shortfalling and no you can't do anything about it because you were not missold - you are too late etc. Some questions do not get answered at all. Perhaps they do not fall into the category of the above 'advice'. I do not happen to agree with this overview of yours but I am not in any way qualified in the area that you are.

If people ask for advice and you respond with such positives as 'no it is the end of the road' - one assumes they are to take this as the advice you are offering. You state that you are a financial advisor and that anything posted is for discussion purposes and not to be taken as financial advice, However, the fact that you say you are a financial advisor points out that the statements you make - mostly very positive ones - are the same things you would say in your role as a financial advisor surely. Or do you have differing opinions in your real life? It is unlikely.

On the other hand my opinions are just that - my opinions which make no claims to be other than they are. You do not have to agree with them and they cannot be mistaken for financial guidance in any way.

People often thank you for your posts and no doubt feel helped by your opinion so no doubt you are doing a good job for them. However, it cannot be mistaken for anything else but advice wouldn't you agree? I am not suggesting for a moment that there is anything wrong in that, but feel it carries more weight because it comes from a financial advisor - advising or not.

Do not fear for me in the 'buy to let' situation (because of past experience I probably do know a little bit about them), I am struggling to pay the debt left by my failed endowment policy and not about to enter that particular area of investment. As I say long live the ISA.

defender_of_the_weak

Crazy saver, you probably won't get an answer much before June. 8-12 months is pretty much the norm unless the case involves a broker in which case it becomes 15-18 months.

Mayb. You have to realise that anything posted on here is opinion only. I am a professional complaint handler and have probably handled and seen more of these issues than any other poster, that does not mean that I know everything only that I can provide information for people to act on or not as they see fit.

In my professional role I was called the other day by a lady requesting all the original info from her file. I had closed it as she had been corrctly time barred but she was appealing to the Ombudsman. She has no chance of overturning the time bar, but feels she must at least challenge it.

dunstonh

You obviously are being selective in reading my posts mayb. I have pointed people in the complaint direction many times. However, where there is no point and its time to give up, I have said so.

Crazy_Saver

Originally posted by dunsonh 11.10.06

Good luck and do keep us informed.

Hi mayb.

I always follow your "dicussions" avidly as I feel as strongly as you do on most of the points. I very rarely but in, as the only experience that I have to go on is my own case.

I just wanted to defend dunston (only a little bit because I know he is more that capable of looking after himself;) ). When I originally brought my case to the boards, he and many others inc., DOTW & Vinno were invaluabe to me in preparing my case for the FOS which is why I have included dunston's final response to my thread back in Otober last year.

I know he often mentions "consumer greed" and "fraudulent claims" for Mis-selling but there must be a lot of people out there who really are just trying to make an easy few pounds trying to claim when they knew all along what they were doing.

It's just unfortunate for people like us who really are genuine and have had to worry about making up large shortfalls. Ours is currently around £32k on a £60k mortgage:eek:

I hope I haven't offended you mayb;)

dunstonh

I know he often mentions "consumer greed" and "fraudulent claims" for Mis-selling but there must be a lot of people out there who really are just trying to make an easy few pounds trying to claim when they knew all along what they were doing.

I mention it often as mayb wants to pigeon hole all endowment sales as fraudulent. When I mention that there are many complaints are not valid and are taking advantage of the complaints system and some are fraudulent, I then get accused of saying they all are.

I have seen fraudulent complaints. I have been victim to one as my one and only complaint against my advice was fraudulent. We get given examples of the sorts of complaints coming in and some are quite frankly trying it on.

The industry is suffering a bit of the "fall over and sue the council" style complaints. Some of which are valid. Some of which are not. The level of dodgy complaints has led to calls from some MPs to reduce consumer protection in financial services and even introduce a fee to complain which is refundable if complaint is upheld.

I do not and have never said all endowments were sold right or wrong. However, whenever I mention that many did know what they were doing and that there are fraudulent complaints, it gets jumped on and twisted to make out that I was saying all were.

Also, it does no harm to understand the economics behind these things to know why these things failed. Especially if you want to acuse those behind the sale of the products of fraud.