Endowment Compensation For Mis Selling

Personally I thought Endowment mortgages were a poor product in the first place. Everyone concentrated on how much money they were going to make without even considering the market may go down.

Now the market has gone down and the value of investments haven't made as much as everyone thought they would everyone wants compensation.

Take your compensation and next time don't gamble with something as important as your mortgage.

Regards

PB

I agree somewhat - it can only be mis-selling if no one and / or none of the provided literature did not make it clear that the markets can go down as well as up. There have been no guaranteed return products for quite a few years now, I believe, and so all endowments have an element of market risk. I am surprised you are getting any compensation for something sold in the last couple of years as I thought this market vulnerability blurb was now standard literature, limiting the weight of the "ignorance" defence.

Rather than seek advice here you're better off discussing with CAB, solicitor or accountant.

I distinctly remember being told "you'd be mad to get any other kind of mortgage, the endowment will pay off your mortgage and you'll get thousands more too! You can't fail!" this was back in about 1988

Well, as it happens I've paid off my mortgage, so the projected shortfall when the thing matures won't be a problem.

I don't play the stock market so didn't fully appreciate the downturn of the the market could make such a huge difference to my (mis)fortune, I took the word of the person selling, also took the advice of some close friends and lo and behold, I was mis-sold.....

Me and several thousand other people........

Sadly, the guy who sold me the policy, I have known for 43 years... His father was my godfather, his siter my Godmother, his brother is my best friend.
Because of this and valuing friends more than money, I have not lodged a claim..........

I too bought the Endowment policy but the short fall is/was not going to be a problem as I was not going to be in my flat forever.

<rant>What I really have not appreciated is that when companies realized that policies were going to fall short, my company, Standard Life, was sending out statements that were very rosy indeed. 'No problem here'they said and I congratulated myself on researching and selecting a 'top' company. The fact that they were fighting off a 'carpet bagger' at the time and trying to get members to vote against demutulaization did not factor in my calculations at all. Needless to say once the 'carpet bagger' was defeated I started to get the alert letters and I am now not likely to see anything like 50% of the original amount. Oh and now the BOARD recommends de-mutualization, I guess someone is set to make a load of money but it is not me! </rant>

Andy

Hi David;

I have a similar predicted shortfall, but hopefully only of about £3/4k.

The general advice I've been given is - if the endowment was sold by a well established financial institution, don't bother claiming; as they will have well and truly covered their arse.

On that basis; I'd say you've probably done OK. Take the money and run.

Who did you use to make the claim?

John.

Dear All,

Thanks for that.

I am a sad old bugger so kept all documentatiion and handbooks.#

So when i made a claim against Lloyds TSB Scottish Widows i dealt directly with their complaints dept.

They were very kind and helpful.

The paperwork was easy to complete.

I photocopied the relevant section in the handbook and high lighted the section/disclaimer which needed a manifying glass to read.

I made the complaint on one premise only.

That the policy was to cover the SUM ASSURED.

So this policy failed to provide for its sole purpose.

I will take the money and run.

As i hope to emigrate to Aus early next year i now wish to sell the policy.

What is the best way.?

regards David.

John what about an invite to hear your new toy.

I had mike and pam round to hear my 2 Sonic Impact amps so 2x5w. per speaker biamped.

This is a fun amp and amazing for the money.

You know, financial products are like most other purchases, and a buyer should use some common sense.

Having a vested interest myself in the industry, I am fully aware that many face to face 'advisers' are simply not very good, have little practical knowledge and/or are simply putting their own or company short term interests first to meet sales targets and/or earn bonuses. I personally suspect that, as most endowment policies were sold by bank mortgage salespeople and estate agent based advisers, then lack of experience and product knowledge is chiefly to blaim for any mis-selling, which should be laid firmly at the feet of the employers.

That said, this is where my opininion will begin to differ from many readers I suspect. In it's most basic form an endowment policy is just a combined investment and life assurance product. There are then dozens, hundreds, thousands of variations and permutations from fund choice, term, premium levels, cover options, guarantees and so it goes on. What you should be aware of is that an endowment is not an endowment is not an endowment. Whatever variant is taken, it is however an extremely complicated investment product. I can also assure you that there are many, many funds within many, many investment products be they endowments, pensions, ISAs, Unit Trusts, OEICS, ICVCs, VCTs, Investment Trusts, National Savings, Building Societies and Bank Accounts that have worked and continue to work extremely well for the investor.

So how do you do it?

1. See an Independent adviser. When was the last time you were referred to a tied adviser, even by the sceptical press? Be aware that tied advisers usually are restricted not only in the single company they can use but have access to only a restricted selection of products or funds from that company. The sceptic inside me would suggest they may be the most profitable ones but I cannot confirm that. Apart from a certain bank I know where the use of a Pony as an advertising tool is well chosen.
2. Set time aside to make your planning. Far and away the majority of people I've seen over the years don't initally wish to take time to sort out their financial affairs and are disappointed when I advise them I can't sort out their life for the next 25 years in 60 minutes flat.
3. Don't expect any product to work for 5, 10 or 25 years without reviewing it in the meantime. And this is where so many problems occur. How many of you would believe a salesman who said "...and this car will work perfectly for 25 years and will never need a service or updating. It will be never be anything other than perfect for you"? How about a HiFi dealer advising you that an LP12 will work perfectly satisfactorily day in, day out until the day you retire? Why take that as gospel for a financial services product then? Especially one that may be worth tens or hundreds of thousands of pounds? Why encash your endowment, why not change the fund? Why carry on saving into an endowment? Why not make it paid up and save into something more cost and tax effective? Don't know the answers? Then take advice from a professional and review it every year or two.
4. Hedge your bets. What's the betting that most of you who have tried financial products have pretty much two asset classes within your Pensions, ISAs, other investments. Cash and shares. Maybe a small bit of other stuff but mainly shares. You then get upset when shares aren't doing so well and interest rates are low (with inflation). Well why put your money in shares then? If you know you'd be upset, why did you do it? Did you really think shares will suddenly start growing in a nice even manner? They haven't for the last 300 years, why now? They can go up and they can plummet. They can steam ahead. That's the nature of the beast. Why didn't you invest in gilts, bonds or property as well? Probably because you didn't know you could, probably because your adviser was restricted in what they could offer you. Probably because you didn't bother to take any time to check out whether what you were being told made sense.

So, if you have read this far, forgive me for the indulgence, but it p*sses me off when I see a surge of copycat 'everything's bollox within the greedy self serving investments industry' claptrap simply because, like many other products, it's the crap that ends up reported and repeated. And yet the media do print a number of success stories (I know becase the press ask us for them) yet no-one says "Hey, did you see that in the paper the other day, good for them. I'll try that myself"!

Here endeth the sermon. Amen.

Hello all

One thing to point out is that many of the assumptions used to estimate the likely proceeds at the policy maturity were based on a high(ish) interest rate environment.

Many (and I conceed not all) people will have seen their monthly repayment of interest on the mortgage reduce substantially from when the montgage was initially taken out. This will be particylarly the case for people who took out the mortgage in the mid to late 1980s.

The question is what did they do with the monthly reduction in interest payment? (That's right, they spent it)

If they had taken this amount and invested it (say in additional endowment payments or other investment vehicle) the likelihood is that they would have a much reduced or no shortfall.

N'est pas?

Regards P

Dear All,

as a customer i go to my car dealer and say i want a Hot hatch with about 200ggs 0-60 7 secs
seats 2 adults and 2 kids in comfort etc etc.

The salesman then convinces me that the best product that meets my nedds is >>>>>

So when i was looking to buy a house i needed a mortgage.

I went to my bank and a couple of building Societies etc .

I explained my circumstances to them my financial means and projected salary progressions etc etc.

I was ADVISED that an endowment was the best product to meet my needs.

That it was purchased to act as an investmnt policy to pay off the sum assured at end of term and to act as a life insurance policy too.

I was shown projections of maturity value. I was also shown the difference between it and a repayment policy.

Acting on the advice of the salesman and carefully reading the literature provided i went for an endowment provided by the pony bank.

As many people do you trust Banks.

I hope that when people consult me regarding my professional skills that i give good advice pertinent to the needs of the person.
Not just go for the BUCK.

So here we are 13 years later with a problem with a PRODUCT that aint doing what it said on the BOX.

Hence my success in my claim.

I have friends who work in the Financial services industry as both employees of and owners of Financial Services Businesses hence the reason i have chenged my mortgage twice in 3 years.

When one is sold a pup one should have redress from the person selling that puppy.

As a health care worker i can be struck off lose my job and be prevented from engaging in my chosen occupation if negligence is proven.

The FSA industry does not seem to have the same penalties for the above.

regards David

Ah, David. I fully support your endeavours in seeking redress for poor advice. As said, there is some ropey old info given in this industry by those with less experience, care and diligence than others. I agree negligence should certainly lead to re-imbursement. And the company you mention certainly have had (and perhaps maintain) a poor anecdotal reputation within the industry and the press.

What we have witnessed in the industry however, is a startling amount of bandwagon jumping. I know of cases where policyholders are claiming poor advice against a supplier when really their complaint is poor performance. Unfortunately poor performance does not lead to a successful claim, so it must be poor advice right? How many claims of poor advice do you think were submitted when With Profit bonuses and thereby fund values were on the rise? Not many!

This has lead to a huge about turn in the bank mortgage industry. It used to be when you went for mortgage related advice, the options of repayment or interest only mortgages were discussed (with associated savings plans as available to repay the debt eventually) and advice given. The options of fixed, capped, variable rates etc. were discussed and an appropriate rate agreed. Now you will not get a bank mortgage 'adviser' discussing the best method to repay the loan and they advise only on the rate option. This has meant a swing from 70-90% of mortgages through banks being interest only mortgages to about 95% being repayment mortgage. Neither situation can be right. I believe that the last set of figures I saw showed advice from IFAs being roughly 50/50 as you might suspect in a common sense world. For many people, especially those that move every few years, repayment mortgages are incredibly expensive and a great earner for the banks (it's like taking out a new loan before the old one has run out, you never really get rid of the capital, repayment of which is weighted to the end of the term and you end up paying more and more interest). Interest only mortgages can make more sense, as long as you have appropriate repayment vehicles running along side.

And again, common sense dictates that 25 year investment or debt planning needs a regular check up. The world changes. As pointed out in another post interest rates, tax rules, our own objectives and aspirations change with it. Still everyone lives and learns right?

Just wait until people start realising that their original 25 years repayment loans turn into 28 years, 31 years, 36 years from the first time they took a mortgage as they borrow ever more money to buy new houses which they can't afford to repay within the original specified term. Then we'll see the repayment mortgage complaints stack up.

Plus ce change, non?

quote:

Originally posted by PatG:
Many (and I conceed not all) people will have seen their monthly repayment of interest on the mortgage reduce substantially from when the montgage was initially taken out. This will be particylarly the case for people who took out the mortgage in the mid to late 1980s.

The question is what did they do with the monthly reduction in interest payment? (That's right, they spent it)

If they had taken this amount and invested it (say in additional endowment payments or other investment vehicle) the likelihood is that they would have a much reduced or no shortfall.

Nail on the head and the mistake the industry made were two fold:

1. Not having prominent bold wording in the product key features stating that the policies were/are NOT guaranteed to repay the loan.

2. Not writing to policyholders when interests rates reduced to suggest that they ought to consider increasing the premiums into their endowments to take account of reducing investement returns.

What's ironic is that had interest rates remained high, mortgagees would have paid way more overall per month but they would have been perfectly happy with their endowment policy returns.

But policyholders seem to want to have their cake and eat it - they want low interest payments and high investment returns - and these two rarely go hand in hand.

I have sympathy for those who were genuinely told by their salesperson that the endowment would guarantee to repay the loan but there must be thousands who knew there was no such guarantee but who happily jumped on the compensation band wagon.

Matt.

quote:

What's ironic is that had interest rates remained high, mortgagees would have paid way more overall per month but they would have been perfectly happy with their endowment policy returns.

Absolutely valid point Matt, assuming investment returns had been maintained of course.

As ever above, do review your planning, do expect and accept change, do use common sense, don't accept the free lunch premise, don't get greedy, do accept responsibility where due.

Unfortunately it seems greed and irresponsibility will ever prevail en masse, whether from the consumer, broker, provider or government.

Greed is a great motivator.

The punter wants a maximum return on a minimum investment.

The bank wants a maximum investment and a minimum return in order to achieve improved profitability.

The sales guy wants the maximum reward for his time.

So every body is chasing their own vested interest.

At this time it seems the banks are winning in this as they seem to be posting pretty heavy profits.

The punter loses his investment.

the salesman carries the can for the mess as he/she misinformed the punter.

So it is all fun.

The real loser in all this is the punter.

The banks can skew things to benefit themselves.

The punter can shop elsewhere?????

with another bank.

regards David

quote:

2. Not writing to policyholders when interests rates reduced to suggest that they ought to consider increasing the premiums into their endowments to take account of reducing investement returns.

Good advice unless you are on a fixed interest rate

quote:

Originally posted by Derek Wright:

quote:

2. Not writing to policyholders when interests rates reduced to suggest that they ought to consider increasing the premiums into their endowments to take account of reducing investement returns.

Good advice unless you are on a fixed interest rate

Also monthly premiums for Endowments were fixed for the term of the policy. Pyments couldn't simply be increased.

I know some investment companies did write to their customers recomending new policies be taken alongside the original policy but I wonder how many actually did this.

The clever people would have kept their monthly mortgage payments the same when interest rates fell thus reducing capital but isn't everything easier with hindsight.

Regards

PB

quote:

Originally posted by PatG:
Many (and I conceed not all) people will have seen their monthly repayment of interest on the mortgage reduce substantially from when the montgage was initially taken out. This will be particylarly the case for people who took out the mortgage in the mid to late 1980s.

The question is what did they do with the monthly reduction in interest payment? (That's right, they spent it)

If they had taken this amount and invested it (say in additional endowment payments or other investment vehicle) the likelihood is that they would have a much reduced or no shortfall.

In my own case, I continued to pay the higher rate - I did not adjust my own payments down, so I was still paying off the capitol.

I've still been severely shafted, albeit not so critical for me as I have paid off the mortgage.

It's easy to appreciate all the ins and outs of fianance when you're involved in the industry..........