Did your Advisor tell you Endowments are risky?

huxley

Hi we took out our endowment in 1989 and were told there would be a lump sum at the end of it even went back to the advisor in 1990 because our circumstances had changed (littlun no.3!!!) to check it was still the right thing for us and were told yes :mad: . Now been trying to claim through the fscs as financial advisor no longer about:rolleyes:

dunstonh

However, it finishes this year, and fortunately it looks like it should just about cover the mortgage, so just happy there is no shortfall!

And 25 years of lower repayments than a repayment mortgage as well. Not by a small amount either as you had LAPR tax relief and a good period of MIRAS and possibly double MIRAS.

Remember the potential lump sum at the end if just one part of it. Lower monthly cost comes into play as well.

A common issue with endowment complaints is that the word "could" is very often used on documenation. There is nothing wrong with that. You could get a large lump sum at the end. That is acceptable and compliant. Over time, as memories dim, that could gets turned into would.

dwsjarcmcd

I don't doubt many people were sold endowments 'on a promise'. I should know as I sold them in the early to late 80's and had them myself. The other thing people tend to forget is that they were cheaper that C & I loans at the interest rates were about at the time (around 8-10%) and many bought them for that reason.

Many, many brokers of the day sold Eagle Star endowments as they were the cheapest. Well they weren't actually, they used the highest growth projections, which made them look cheap. Many fell for that.

alm71

I was sold an endowment mortgage in 1991. My husband and I were told there would be a substantial lump sum at the end of the 25yr period. Weren't told of any risk and was told not to even bother considering a repayment mortgage! Well surprise surprise, we now have a huge shortfall facing us in 2016! I have changed our mortgage to a part repayment mortgage to chip away at the shortfall.

I investigated whether we could claim for compensation but was told that as the advice was given by an FA working for our solicitor there is no comeback on them at all.

Retired_I.F.A.

Amazes me how so many people never read their low cost with profit endowment policies as on every one ever printed it states the g-teed amount payable on death and the lower g-teed amount payable at maturity.

silvercar

Retired_I.F.A. wrote: »

Amazes me how so many people never read their low cost with profit endowment policies as on every one ever printed it states the g-teed amount payable on death and the lower g-teed amount payable at maturity.

Because we were advised by supposed experts! If the expert said, don't worry about the small print you will be in the money, what were we expected to believe?

[not getting personal, but you did post.]

Did you get every client who bought an endowment policy to sign a statement that they understood they may not get enough return to pey off their mortgage?

Crazy_Saver

dwsjarcmcd wrote: »

Many, many brokers of the day sold Eagle Star endowments as they were the cheapest. Well they weren't actually, they used the highest growth projections, which made them look cheap. Many fell for that.

Thanks dwsjarcmcd


We were one of "the Eagle Star many"!

Crazy_Saver

dunstonh wrote: »

And 25 years of lower repayments than a repayment mortgage as well. Not by a small amount either as you had LAPR tax relief and a good period of MIRAS and possibly double MIRAS.

Remember the potential lump sum at the end if just one part of it. Lower monthly cost comes into play as well.

A common issue with endowment complaints is that the word "could" is very often used on documenation. There is nothing wrong with that. You could get a large lump sum at the end. That is acceptable and compliant. Over time, as memories dim, that could gets turned into would.

Thanks dunstonh, I really do understand where you are coming from, although I wouldn't have done back in 1991.

I realise that we as consumers should have read and fully digested all the smallprint, which is something that you and many others have taught me to do now that I am older and wiser.

What I really want to know is, if consumers were fully aware of the risks they were taking, how was it put to them by their advisor.

Surely there must be someone out there who isn't/wasn't in the business who can say that their FA explained the pros and cons of an endowment to them fully.

Crazy_Saver

Retired_I.F.A. wrote: »

Amazes me how so many people never read their low cost with profit endowment policies as on every one ever printed it states the g-teed amount payable on death and the lower g-teed amount payable at maturity.

Thanks Retired I.F.A.

I understand what you are saying and yes we did read the policy and yes it did state the lowest amount payable on maturity. Alass, we really were lead to believe that this figure was for illustration purposes only and not to worry about it.

I suppose this must sound like a "cop-out" to someone like yourself who fully understands the financial world but back in 1991 both my husband and myself just listened and believed.

We are oh so much older and wiser now;)

dunstonh

It also has a lot to do with timing. I would estimate that a probable majority of sales pre 94/95 were not quite as compliant as they should have been. 1980s cases had little rules to follow so its hard to say that they were mis-sold although by todays standards they certainly were. Post 95 cases are where compliance departments started realising risk warnings needed to be more prominant and also lower projection rates on illustrations highlighted one example rate which would show a shortfall. So based purely on odds, an older case is more likely to be a mis-sale than younger one.

It is also worth noting that in the 80s and even to mid 90s, endowments had never failed. The media and consumers association were regularly saying endowments were best. Family members were getting big payouts in excess of the amounts needed. Complecency set in as (like property has been in recent times) the mindset was they never failed and always made money.

So, it wouldnt surprise me to see advisers downplaying the level of risk which in itself is not a mis-sale. Chances of the endowments failing at that time were low. Thankfully, we are all better off because the things that made endowments fall short have made us better off in other areas by amounts far greater than a potential endowment shortfall.