Report Endowment Misselling Compensation SUCCESSES

holly_hobby

My dear .. you are are one on the high horse, with apparent higher morals than anyone else in the industry at the time, and an arrogance to others that choose to disagree in this thread, that is quite simply breathless, turning to the nasty.

I was told as a child that when people resort to name calling, they have lost the argument - I tend to agree.

I am not in my 50s - but was in the industry at the time of polarisation and FSA87, I wasn't a saleperson at that time either, although I remember my parents buying a few endowments off the guy who used to knock each week with his little black payment book and brief case - who sold them anything from general ins, inc B&C, to term assurance, WOL and endowments. The only basis of advice ? What could they afford each week - certainly not was it suitable to the ATR, requirements, what existing provision did they have, etc .. etc.. etc.. etc.... so no there wasn't regulation re the establishment of best advice and suitability, before that time - (thankfully times have moved on somewhat !)

I apologise for using jargon, but your statements were that you are a knowledgable industry insider - although I do admit your posts do suggest otherwise.

RU89 stands for Regulatory Update 89 - an FSA directive on how compensation should be calculated in the case of an upheld LCE endowment, which was facilitiated by MF - Mortgage Fundamentals - the industry software used to calculate your loss and compensation. So the term RU89 was "coined" by no other than the FSA (sorry Financial Services Authority) And I conceed you may indeed not give 2 hoots about such terms, but the fact they formed the basis of how your lump sum & interest, happily landed on your mat, should put some relevance on them for you.

Once a poster feels unable to make valid comment, but instead decides to become personal, offensive and immature in their responses, as their points become debated and duly dismissed - I know the thread has disintergrated, the argument and the debate duly over.

Holly

(.. by the way my high horse takes offence at being called tatty ... she's rather handsome in fact !)

magpiecottage

I have not contributed to this thread for a while but a complaint relating to something that happened prior to 1988 would be either contractual (there really was a promise that a particular amount would be paid) or covered by the Misrepresentation Act 1968.

In theory, if a misrepresentation could be proven then there would be grounds for redress but all such cases relate to events over two decades ago. It is unlikely that evidence survives.

That may, or may not have occurred but in reality the low cost endowments purchased in the 1970s and early 1980s generally did reach their targets. This is because they benefitted from higher rates of growth in the early years that in turn reflected high interest rates and inflation.

In the 1990s we saw a realignment of the economy. Inflation and interest rates fell and so did investment returns. Had we retained the runaway inflation of the previous decades endowments would have reached their targets - but we would all have paid a lot more interest.

A couple of small corrections:

RU 89 was one of series of Regulatory Updates (that is the "RU" bit) issued by the Personal Investment Authority rather than the Financial Services Authority which replaced it 10 years ago this month.

Mortgage Fundamentals (MF) is a proprietary piece of software produced by a company called Exasoft. However, it can be done with a spreadsheet. (I prefer to do it this way because I can then see exactly how an answer is arrived at - beside, I do not have to pay Exasoft for a spreadsheet!)

Holly doesn't have a high horse, she has a Hobby Horse:rotfl:

holly_hobby

Yes of course PIA .. FSA on the brain ... apols for the slip !

Yes MC your absolutely right, MF is indeed proprietry software operated under licence - it is widely used within the industry, but I can't say exclusively, as I can only comment on the 4 companies within which I was invovled in LCE complaints - whom exclusively used this system for calcs (ex return of premium or guranteee situs - FOS AFAIK also used MF.

IFAs etc who elected not to pch the licence, did indeed use spreadsheets where reqd, so apols for the sweeping infrence that all used MF.

Thanks for clarifing those 2 points MC.

H x

2sides2everystory

from_on_high wrote:

I wasn't a saleperson at that time either, although I remember my parents buying a few endowments off the guy who used to knock each week with his little black payment book and brief case - who sold them anything from general ins, inc B&C, to term assurance, WOL and endowments. The only basis of advice ? What could they afford each week - certainly not was it suitable to the ATR, requirements, what existing provision did they have, etc .. etc.. etc.. etc.... so no there wasn't regulation re the establishment of best advice and suitability, before that time - (thankfully times have moved on somewhat !)

Don't kid yourself that you have identified your target from a simple black book and briefcase, Holly. I wasn't a man from the Pru, the Royal London or any such lightweight. Some of my larger direct clients by the mid 80s were paying six figures annually for their general insurance premiums, and although I calculated the premiums they weren't actually from the little black book. I do believe however that the little black book is also in my loft somewhere!

MC wrote:

the low cost endowments purchased in the 1970s and early 1980s generally did reach their targets.

I'd agree with that, but those purchased in 1986/1987 even from those companies with the best with profit bonus histories were often newer variants with names which associated them directly with a house-purchase purpose. They were too highly geared, they were a final attempt to regain market share to new entrants and they failed to win market share and were subsequently allowed to fail full stop. Indeed, my compensation was almost solely as a result of the failure of the 1987 policy.

Meeper

Ooh, a heated debate. /popcorn

By the way, a free university education is not a basic right. Your arguments just lost all credibility with me, well-structured as they may be.

2sides2everystory

You are an Independent Financial Adviser which makes you a member of a mixed bag - well structured as your products might be, my sentiments towards your sort on the credibility front are probably mutual.

magpiecottage

The pre 1988 versions of endowments typically had names like "Economy Plan 80". This was because the target would be reached if the annual bonus rate was 80% of what it had been historically. On top of that there was the prospect of a discretionary terminal bonus.

However, this assumed that the economy remained as it had been - in particular that inflation would continue to average at around 5% and interest rates a bit above that.

That assumption seems unreasonable now but it did not then.

In 1988, the rules changed and LAUTRO, the insurers' regulator dictated that illustrations should show maturity values using standardised rates of return (10.5% and 7.0% at the time) and allowed firms to show the rate required to actually clear the mortgage if it fell between these.

However, LAUTRO dictated that standard charges could be used which were lower than actual charges.

The upshot of all this was that regulation intended to protect consumers actually resulted in it becoming impossible to differentiate between one provider and another. As DunstonH says, consumers wanted the lowest possible monthly outgoings.

So IFAs were forced away from a comparison of historical bonus rates, which at least had some basis in fact, to new whoever was cheapest - which meant the lowest premium (even though that increased the risk of a shortfall).

kingstreet

Ah, this is becoming a stroll down memory lane...

Remember when we all waited with baited breath to see if Standard Life was again top of the 25 year endowment tables in the May issue of Money Management?

60% terminal bonus?

You bet they were... :silenced:

Hanky_Panky

2sides2everystory wrote: »

It helps if you bloody well clamber off that tatty high horse of yours Holly and listen to elders and betters

I love it that you posted this when so clearly you are not - laughable. :rotfl:

dunstonh

Remember when we all waited with baited breath to see if Standard Life was again top of the 25 year endowment tables in the May issue of Money Management?

ahh, the days when you took data from the pink sheets and not a computer. And when you knew what your daily workload was when the post arrived as you wouldnt be getting emails, text messages and mobile phone calls throughout.

Almost nostalgic.