Did your Advisor tell you Endowments are risky?

treliac

dunstonh wrote: »

Your opinion but not one that sits with what happened....

My opinion - because I had never followed the financial market, the media, or even thought about ‘perception of risk.’ All I knew, and yes, I consider myself average in this respect, was that a salesman and alleged professional financial adviser, persuaded us to take a form of mortgage that was going to be in our interests in a way that my previous repayment mortgage would not be able to match. I have to admit that I was not entirely convinced but my OH was and it was because he had no occupational pension that this was something he/we qualified for. Being newly married I fell in with the plan, much to my current regret because this has gobbled up our earnings relentlessly. We should be in a very different financial situation now.

For many years we thought we were buying our house but were effectively just renting it. The only bodies that did well out of it were the salesman and the companies we paid out a big chunk of our earnings to, for many years but getting nowhere. When we changed back to repayments, we found ourselves having to start again from the very beginning. If we had not realised the need to change in time, we might well have ended up having to sell our home on retirement because we would have then discovered we had no way of being able to own it outright.

It may be a difficult concept for those who have understood and been able to play the financial markets but not for the average person whose skills and interests lie completely elsewhere.

Both my siblings were advised to buy their homes via endowments and did so. Both have converted to repayment mortgages now but did not complain, not because they felt they didn’t have strong cases of having been misled/missold but because they didn’t have the confidence, stamina or had kept enough of the paperwork to feel able to take the fight on. Furthermore, their IFA had gone bankrupt.

So when you talk about “sits with what happened”, that is what happened with us.

treliac

Retired_I.F.A. wrote: »

Read it slowly and it'll sink in Treliac. (it's kinda like the remote control for a tv kids suss it straight away, men take two mins and the pretty ones in the family take a year or two

There you go being controversial again. You don't know just how pretty I am!

Retired_I.F.A.

Your not average though Treliac, The average person understood how it worked not because they were financially savvy but because they had quotes/illustrations and had it explained to them. They saw the risk but accepted it as being as likey as being run over crossing the road.

Okay the top salesman in the world are experts at ovecoming objections but the best of them point out objections you may never even think of and explain the pros and cons in detail. The salesman you dealt with sold your husband but not you. In my book thats a missale as although the pension is his you have a joint mortgage and must be sold on the idea equally as much. In the ombudsmans view though who knows.

Retired_I.F.A.

Just found this for you Treliac. not read it myself yet but you and you husband ought to.

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/56/56-calculating-redress.htm

Rabiddog_2

I took out (was sold) two endowments, one really, but split into two parts, (85% + 15%) with CIGNA in 1988, I was sold these on the premise that it was slightly cheaper than a repayment mortgage and that I would receive a nice fat surplus at the end. The advisor used the guidelines of possible growth, I think 6% and 10% to illustrate what I would be left with at the end. No mention of it not paying off the mortgage, or I think there was some amount £43,500 against a £45000 mortgage, that was the least I could get. My problem was that I never received ANY info on the endowments in the first ten years (???) and the companys kept changing hands Britannia, Alba, resolution and probably a few in between. Needless to say they are underperforming, or the crazy thing is one is underperforming badly (85%) whilst the other is due to give a surplus (15%).. what I dont understand is that they were both taken out at the same time AFAIK invested in the same funds. I now endeavour to understand the financial products I buy a lot better.
NB I have worked with someone whose endowment matured and paid out significantly more than the mortgage, £2000 mortgage and £4000 payout, so they were good payers originally.

Crazy_Saver

dunstonh wrote: »

You are also not risking your house. Most 25 year unit linked endowments are still expected to come close to hitting target or still pay surpluses. The shortfall figures for the majority in a shortfall position are actually quite low and even if you do end up with a shortfall of £5000, if it cost you £15pm less over 25 years then you paid £4500 less making just a £500 shortfall.

I appreciate where you are coming from dunstonh, and yes when the figures are as you are quoting then one does wonder why so many people are still jumping on the mis-sale bandwagon.

We are not rich, we are an average working class family with young children. My husband works full time and I work P/T in a school. We took out a £60k mortgage in 1991 and were so looking forward to being mortgage free in 2016.

Last year, our endowment was expected to pay out less than £27k at maturity.

We have since sold the policy, paid most of the proceeds into the mortgage and have had to extend the term by 10 years to cover the extra £33,000 (so as not to risk our house) and will now not be mortgage free until 2026!

That is such a blow to us as we have never missed a payment, never taken out a loan and never relied on credit cards. No matter how much we struggled in the early years.

Whether I'm believed or not, I feel that my husband and myself were duped into surrenderreing a good endowment for a very bad one. If the company involved had been honest and accepted some responsibility, I would not feel as strongly as I do. But they have lied, tampered with evidence and made us out to be liars too. They are a well established firm in the city and to have helped us out would not have made even a dent in their finances or changed their lives, but really would have changed ours.

Yes, as you say, £5K can be made up here and there, but £33k is not easy to find.

I have found myself lately comparing my personal situation with those involved with Northern Rock.

Northern Rock investors took a known risk and because their loss is so great, they are looking to the government for compensation.

No one out there is offerring my family a life line!

Sorry to rant, but sometimes I just feel that life is unfair!:mad:

Crazy_Saver

Retired_I.F.A. wrote: »

Thing is Crazy Saver your asking the crowd at the football match whats on tv.

Why would the vast majority who were correctly sold be interested in a thread about missold endowments on a board owned by a guy in the public eye who encorages claims?

Fair comment Retired I.F.A.;)

Crazy_Saver

Retired_I.F.A. wrote: »

Royal life invented the low cost endowment and sold two kinds obviously I cant remember exact figures now but the quotes were akin to this..


LCE 1
£20,000 MORTGAGE 25 YEAR TERM
joint life male aged blah blah blah blah blah

MONTHLY PREMIUM..............................£ 27.20p
Gaurenteed sum assured on death......... £20,000
Gaurenteed sum assured on maturity...... £10,200
Reversionary bonus's *........................ £14.000
Terminal bonus**.............................. £10,000
Estimated maturity value...................... £34,200
Surplus after repayment of mortgage...... £14,200

*Reversionary bonus's shown assume continuation of our current declared annual rate payable throughout the term. Rates can and do vary however once declared a reversionary bonus is gaurenteed to be paid on maturity.
** Terminal bonus shown assumes our current declared rate applicable on an with profit endowment of £10.200 maturing today, note that terminal bonus is not gaurenteed and liable to vary considerably if any is paid at all.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LCE 2
£20,000 MORTGAGE 25 YEAR TERM
joint life male aged blah blah blah blah blah

MONTHLY PREMIUM............................. £ 29.50p
Gaurenteed sum assured on death......... £20,000
Gaurenteed sum assured on maturity(a).. £17,600 without profits
Gaurenteed sum assured on maturity(b).. £ 2,400 with profits
Reversionary bonus's *......................... £ 2.800
Terminal bonus**................................ £ 200
Estimated maturity value...................... £23,000
Surplus after repayment of mortgage...... £ 3,000

*Reversionary bonus's shown assume continuation of our current declared annual rate payable throughout the term. Rates can and do vary however once declared a reversionary bonus is gaurenteed to be paid on maturity.
** Terminal bonus shown assumes our current declared rate applicable on an with profit endowment of £2.400 maturing today, note that terminal bonus is not gaurenteed and liable to vary if any is paid at all.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


The only people who ever bought LCE 2 were those that had a 100% mortgage. Lenders would give 95% Royal life the 5% on condition that a LCE2 was taken. Both were available to all but no one wanted a non profit endowment element. The piority for all those that had a LCE2 once in the property was to save enough to repay Royal Life's 5% and switch to a LCE1 type plan.

All that was in the quote except any reference to bonus figures was written clearly on the policies.

And they say millions were missold.:rotfl: Like hell they were.

Like treliac, I admire your subject area knowledge Retired I.F.A.

Alas, if I'm completely honest, even after everything I have tried to learn from this site, it's still difficult for me to fully understand what you have written. (Maybe I'm just too pretty;) )

I know that FAs didn't have a crytal ball but I really think that we should have been made much more aware that we were taking an incredible risk with our money.

I understand that we were probably just unlucky. I remember our advisor's personality so well. Very loud, confident, fast talking and very strong charactered. When she used phrases like "you don't have to worry about that" or "I'll fill the paperwork in for you" etc., we just agreed.

It must be difficult for you to understand how ordinary people off the street like myself could have been so gullible, when you understand the financial world so well.

I just wish that we had had you or dunstonh or someone like you to help us back then.

treliac

Retired_I.F.A. wrote: »

Royal life invented the low cost endowment and sold two kinds obviously I cant remember exact figures now but the quotes were akin to this.......

Hi, It was late last night and I've now had a longer look, I thank you again for the time it must have taken.

Now a year or two, sorry night or two down the line I can get a better picture of what you are saying. I would still need to discuss it face to face to properly understand what each line means and how it adds to the final figure but think I would get there with some help (I'm really not that dumb) and I'm getting it generally.

However, we didn't get that support when we bought our product, just lots of slick talking which we didn't see enough need to cross question seeing as we were in the hands of a financial professional giving us 'best possible advice.' We were told how the mortgage would be paid and the surplus would permit early and comfortable retirement, blah, blah, blah - I remember that conversation getting a bit fanciful and did take some of it with a pinch of salt.

We have a booklet detailing the product and enclosing a sheet for our personal quotation. This is completely blank. Only just dug it out recently.

Now a lot of water has passed under the bridge and I am certainly not holding out any lingering thoughts of retiring early (unless a miracle happens) but I did, bottom line, expect that the mortgage would be paid and without all the extra cost, etc (but then I've been over and over that already). So we'll see what the FOS makes of it all.

Thanks for the link to the Ombudsman News and for remembering that it was a pension mortgage in our case. There's not so much to be found on them (reasons already discussed) and I am told they are very complex to assess redress on, may even need actuarial input.

We'll see, treliac :huh:

treliac

Crazy Saver

I know you have said before, but can you just remind me of how long your case has been with the Ombudsman already? I know it's going to be a long haul and we're likely to be hanging around on this for ages.

Also, as you've agreed, there's not going to be much interest in this thread from someone who is completely happy with their mortgage product but lots of people look at different posts even if just out of interest and I'm surprised there aren't a few more telling us how open, honest and wonderful the advice they were given had turned out to be.

treliac