emdowment buying

eyewash

Our financial advisor has been looking into a new scheme of investment which involves buying up other peoples endowment policies. he says it is the latest thing in America and is becoming popular here. I think you buy on the basis that they have a minimum payout at completion of the term. Don't know much more. Does anyone out there know about this scheme? Is it risky? He says not but has not got his head round the full picture yet.

EdInvestor

Do you mean Traded Endowment Policies (TEPs)? These have been going a long time here, but aren't seen as a very good investment nowadays as the endowment policies are not performing - as is obvious from this forum

But perhaps you mean "viatical" policies?

Be careful with these: there have been a number of fraud issues in the US with them.

Details here

dunstonh

Do you mean Traded Endowment Policies (TEPs)? These have been going a long time here, but aren't seen as a very good investment nowadays as the endowment policies are not performing - as is obvious from this forum

A TEP is not an endowment.

As mentioned on a previous thread today, the fund is a collection of traded endowments in with profits funds.

1 - Some with profits funds still have good potential and have outperformed a balanced managed funds over the med/long term
2 - The difference between the purchase price of the endowment and the guaranteed minimum maturity is often quite large. Thats a profit before you even look at bonuses.
3 - There is the view that terminal bonuses will increase again with certain insurance companies and that is already beginning to show. These TEPS are investing on that potential. This is why they are more selective on the companies they are willing to consider. Whether they are right or not in the long term, time will tell. At the moment, they appear to be right.

EdInvestor

While I agree that some Traded Endowment Policies are worth keeping if you've got one, the poor performance of many policies has meant that the TEPs market has become pretty inactive these days. Most existing policyholders cannot find a TEPs trader who is willing to buy their policy (I wonder why?).

IMHO any potential investor should seek independent valuation of any endowment policy a trader tries to sell him.How much "old stock" have they got on their books from the days when endowments were decent performers, that they may be trying to unload on you?