Endowment

lizziec_3

I am a new member and this is the first time I've posted a question, so please forgive me if I've got the method wrong.
We have had an endowment mortgage in place since 1994, and have absolutely no complaints about the manner in which it was sold to us. In 2001, we decided to build an extension to our property and were put in touch with a local Financial Advisor, who subsequently arranged the top-up mortgage for us. He advised us to take out an additional endowment policy to cover the increase, which I completely understood. However, at the end of the first year, on receiving my annual statement from my then building society, I learned that the top-up was actually a capital and interest mortgage and therefore there was no requirement at all for an endowment. Last year, I contacted one of the many companies who state they will take on the case on a no win no fee basis. The company wrote to the Financial Advisor, who responded by saying that by virtue of the fact that I already had an endowment in place, I must have understood the consequences. They further stated that, as my partner had been declared bankrupt a number of years previously, this was the only way we could have obtained a mortgage. The company advised me they did not think it was worth continuing as they felt I would lose. My partner had indeed been declared bankrupt a number of years prior due to the acrimonious breakdown of his marriage, however, this issue had been closed for a number of years prior to our application for the top-up.
The situation has made me a bit wary of trying again independently and I wonder whether anyone could offer any advice.

ReportInvestor

If you took out an additional repayment mortgage for the extension, I'm not clear why you would have needed an additional endowment.

Are you sure this was not as a result of a discussion about the possibility of your original endowment not reaching its target?

The IFA would have reviewed the whole picture when he met you and that might have cropped up.

lizziec_3

Well, the IFA looked over the original endowment, but the only comment he made was that, as the original mortgage was an endowment, we should probably take out the top-up along the same lines. As he had been recommended to us by a trusted source, we didn't really question his judgement. At no point after that did he mention that the mortgage he had arranged was C & I and therefore did not require a further endowment.
Also, a few people have advised me that, if he felt the original endowment would have a shortfall, he should have suggested a Life insurance policy, which would have been more economical than another endowment. Do you think this is right?

ReportInvestor

lizziec wrote:

Well, the IFA looked over the original endowment, but the only comment he made was that, as the original mortgage was an endowment, we should probably take out the top-up along the same lines.

At no point after that did he mention that the mortgage he had arranged was C & I and therefore did not require a further endowment.

Most odd.

This sounds like you had a dodgy IFA .

Unless there is a serious misunderstanding?

dunstonh

There has to be more to this than what we are seeing here. An endowment sold to cover a capital and repayment mortgage would be classed as a mis-sale unless a damned good reason why decreasing term assurance wasn't sold was documented.

The fact the claims company are pulling out suggests that there is more to it as well. They would pursue it if they felt the initial decline was just an attempt to put you off. I'm sure DOTW will respond to this thread in the coming days with his views and you should note them as he is the most experienced poster here dealing with endowment complaints.

Also, a few people have advised me that, if he felt the original endowment would have a shortfall, he should have suggested a Life insurance policy, which would have been more economical than another endowment. Do you think this is right?

No. A life policy would not have covered any shortfall. A range of options could have been considered which may have incorporated this as part of the solution. However, this alone would do no good at all.

My best guess at the moment was that he was using the endowment to provide investment growth which would be unaffected by past bankruptcy issues. I doubt any shortfall issues would have come into it at that stage as that didn't really begin until 2002.

Did he recommend a unit linked or with profits endowment? if unit linked, i guess one saving grace is that it was excellent timing (with hindsight). It would be well on track for surplus at this stage as all the units would have been bought after the stockmarket crash.

defender_of_the_weak

As Dunston says,most odd. All the focus appears to be on the IFAs wrongdoing, it may be that the mortgage was incorrectly set up. If the third party company dropped it, this may be because they do not have the time, resource or expertise to take it to the Ombudsman, and they too (yes I know it happens) feed you a different line to get rid of you.

Of more immediate concern is the date of the last letter from the adviser detailing referral to the Ombudsman, if it is more than 6 months since you received this you are probably dead in the water. Provided it details the time limits for referral.

The actual reasons for rejection, just do not stand up to any real examination in most cases

EdInvestor

I nominate the cockup theory as a possibility in this case: type of mortgage wrongly processed at the BS.

Have you made a loss Lizzie?

lizziec_3

Thanks so much for all your responses. Yes it is over six months since we received the letter from the claims company along with a copy of the letter they had received from the I.F.A. I've been searching for these letters for two days, and cannot find them. So unlike me, I'm normally fairly organised. Anyway, I intend to phone the claims company to request copies.
Regarding whether we made a loss, although we now know we do not need the second endowment policy, we decided to keep it running and hopefully it should cover the potential shortfall on the original.
I do agree that there's more to the situation than meets the eye but I just don't know what. The only thing I can think of is that it is in some way connected to the previous bankruptcy situation but that was all over and done with years before. Also, on a personal level, I have never encountered any problems of this kind. I ahve a good credit rating and mortgage payments always up to date. I'm so annoyed at myself for misplacing these important documents so when I get copies I'll post the salient points.
Thanks again.

lizziec_3

OK folks, after all this time, I have eventually managed to get copies of the letters in question, the salient points of which are noted below. The majority of these are totally inaccurate. Capitals denote the comments from Sesame (the company who rejected my claim), small case denotes my comments:
THE ADVISOR SHOULD HAVE RECOMMENDED A REPAYMENT MORTGAGE
At no time did I state this. The point I made was that the top-up mortgage is a straight repayment (Capital and Interest), for which no endowment was required, so why did he take the second endowment out at all?
THE RISKS OF THE POLICY WERE NOT EXPLAINED.
This point is really neither here nor there, as even if he did explain the risks, it was for a policy which we now know was not required in the first place.
A FACT FIND WAS NOT COMPLETED
I agree a fact find was completed, however, this was becaused we believed we were getting an interest only mortgage.
YOU WERE EXPOSED TO AN UNACCEPTABLE LEVEL OF RISK.
I did not suggest this, as the IFA did explain the level of risk, albeit for a policy which was not required.

I also have the originally 'letter of recommendation' from the IFA in which he makes comments like 'Elizabeth's brother recommended our firm'. I don't have a brother. He also makes the statement 'I (IFA) recommended an endowment with profits mortgage' but then proceeded to organise a C & I mortgage. As I mentioned previously, I did not realise he had taken out a C & I mortgage until I received my end of year statement from the Halifax.

The letter from Sesame is dated August-05. As contacting the Ombudsman should be within 6 months of this, perhaps I have no chance, however, I'd like to try anyway. I did request copies of the letters back in February, which was within the timescale, however, had to phone numerous times before actually receiving them
Has anyone any further thoughts or advice?
Thanks.
Lizzie
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