Q for FOSman and DunstonH...and all

plucky_phil

Hi

We bought an endowment back in 1998.

When the adviser visited us, we produced all the required payslips and mortgage statements etc, and the adviser completed the fact-find on a computer, quickly scrolled through the computer pages and then printed out a sheet for us to sign.

Having physically given the advser all the documents, we had confidence that the fact-find would have been produced correctly and accurately. We signed the sheet.

Now of course, looking through the fact-find, we have found that there are numerous errors, including underquoting my salary by over 25% etc.

There are 2 declarations on the form we signed. One states that the information we have provided was correct. The other says that we have viewed the information on the computer from which the form was printed.

In recommending a 25 year policy, the adviser completely ignored the maturity of an existing policy in 15 years time, and my salary structure which would enable increased payments in years to come.

There are other factors as well, but thats enough for now.

The FOS adjudicator seems to think all was ok with the sale.

I think the adviser did not act with due care, skill and diligence.

Any thoughts?

plucky_phil

FOSman

You can argue that as the fact find was not accurate, then one should not place too much emphasis on it. However, it was your responsibility to check the document you signed to say it was correct or otherwise.

A dodgy fact find does not show that the policy sold was unsuitable. In fact, the fact that he under quoted your salary shows that you were in a better position to take a risk than was initially suggested.

As for the term. Unless you can show you had a problem with it at the time of advice, then the adviser was right to assume that you were happy with the term. The term will have been evident from a number of documents you would have received.

Anyhow, its not really a problem if your other policy matures earlier. That just means you can reduce the interest only mortgage earlier. Its only a problem if the policy matures after the maturity of your mortgage.

Sorry mate, from here, doesn't sound like its enough to uphold the case. You need to show that the policy was unsuitable. Hope this helps.

plucky_phil

Thanks

The policy does mature one month after the date of the mortgage, but the Adjudicator says I would have been aware of that at the time.

Plucky_Phil

dunstonh

Endowment maturity dates oftern do not match the mortgage redemption date. Especially with second or third move/remortgages. A lender would allow some differences without re-applying for lending. You may start the first mortgage in January but a later move or remortgage resetting the term may take place in October and so on...

Not much else to add as FOSman has covered it.

On factfinds, unless it's a income specific need, say maximising income protection or pension contributions or addressing shortfalls based on income, then often the income figure will be a ball park figure rather than 100% accurate. The question, "how much do you earn?" is often responded with a rough figure. In this case, the income/expenditure was only asked to confirm if you could afford the endowment. With 25% less income quoted, you could still afford it.

payless

with regard to the income understandment, are you saying you would have rather had a 15 yr term - would you still have taken an endowment anyway

plucky_phil

If the adviser had said that we had enough money to afford a policy with the same term yes. But she never offered it. She said on her covering letter that she had recommended a 25 year term "to keep costs to a minimum".

If she had recorded my salary correctly on the fact-find, a 15 year term would have been affordable.

dunstonh

Did the advisor arrange both the mortgage and the endowment? i.e. if the mortgage was set up with a mortgage clerk first and then referred to the advisor afterwards to discuss repayment method, the advisor would be meeting the terms of the mortgage agreed with the lender.

If doing both, then that side could not be argued.

If she had recorded my salary correctly on the fact-find, a 15 year term would have been affordable.

Just because the 15 year term was affordable, would you have done the 15 year term?

In recommending a 25 year policy, the adviser completely ignored the maturity of an existing policy in 15 years time, and my salary structure which would enable increased payments in years to come.

An increasing salary structure is always a hard one. With people changing jobs frequently and companies changing contracts of employment often, it could equally be argued that relying upon an income in the future that may or may not appear would not meet the "ability to afford repayments both now and over the term of the policy".

For example, lets say your contract changed and those increases didn't come, you may then complain the sale of the 15 year endowment was wrong because it took into account increases that were not absolutely guranteed to take place.

plucky_phil

I cant recall if the advisor set up both the mortgage and the endowment, it definately went through the same office.

If a 15 year term, which would of course the mature alongside the existing endowment, have been recommended we would have accepted it. That way we would be mortgage free when I retire. (And yes, sadly it is affordable in retirement).

Due to the nature of my job, we tend to stay with the one employer for the career, and yes, the salary steps are pretty much cast in stone.

So the adviser ignored the maturity of the existing endowment, and my increasing salary, facts which were subsequently highlighted by the PIA in Regulatory Notice 91.

But of course, in the eyes of the FOS Adjudicator "thats ok!!"

dunstonh

I cant recall if the advisor set up both the mortgage and the endowment, it definately went through the same office.

This is quite important. Back in my banking days, the mortgage person would see the customer first, agree mortgage style (discount, cashback etc) and term of mortgage and then the advisor would be on a different appointment or a handover. The purpose of the advisor was to discuss the repayment methods and provide the correct insurance/assurance policies for the mortgage that had been arranged. So, the mortgage term was not an issue that was been recommended by the advisor. The appointments would be in the same interview rooms, in the same building.

plucky_phil

Ahhh I see what you mean.

It definitely was the adviser who did the whole lot, in our lounge room!!

payless

what I was getting at is that you seem to be saying you would have purchased a 15 yr term endowment, so is this really a "normal" endowment review.- has reviewer looked at it based more you seeing nthat youy understood the risks of an endowment,

Is policy a unit linked plan, and is it more of a level charge or front loaded
( ie on original illustration , it would have showed very low surrender values in the first 3 years if front loaded)

BTW, a 15 yr endowment ( higher premiums) would have likely earned him more commission