Endowments The Forgotton Scandal (how big Insurance Companies Unloaded their responsibilties)

You have my sympathy.

FWIW, I have an endowment and have no problems with it at all, I think there's been a lot of media scare stories going on here. At the end of the day, interest is low so they are underperforming, 10 years ago it was the opposite and were more popular. In 10 years time it might have gone full circle again.

And even if interest rates stay low and the endowment underperforms, I'm sure I can figure out some way of saving a bit of cash over the next 15 years. Since interest rates are low, the money I have to pay as interest to the mortgage lender is lower, so there's the money I have available for saving?!

R.

I worked in the Life Insurance Industry as a self employed agent (IFA) from 1994 until 2001.

I have recently been told by the Financial Ombusdsman Service that I am personally liable for every life insurance based investment (Endowment) that I sold as an agent of a Life Insurance Company.........that fails to perform well enough to pay the investors mortgage.

Doh.......How long am I liable?

Well.......My estate is liable until my death plus 3 years. (I'm not joking)

I have been out of this business since 2001 but the Financial Ombudsman Service charges 365.00 for each case they investigate, valid or not. Just that charge alone...well you can fill in the blanks.

If anyone has any experience they could pass on.........they would be most appreciated

Or if anyone knows of a IFA's NewsGroup or Blog where these things are discussed.

The Life Insurance companies that sold these products seemed to have shoved all of the blame onto IFA's.

There were adverts in your face everywhere in the early 90's. We sold them as we were taught to by govt appoved teachers. And sometimes we did not sell them at all.......customers who saw the advertizing were directed to us by the Life Insurance Companies.

Practically No one listened to any words of caution from us.

We were always taught to make sure the customer understood that in an endowment mortgage, the mortgage is Interest only, and that the house would be paid for by a term dependent on the performance of the Investment Portion of the endowment, and that there are no guarantees on the amount of return......but the dear old UK public always just looked trustingly at the Illustration issued by the Insurance Company, Norwich Union, Legal and General Etc...... and said thats for me. Early mortgage payoff, and/or extra cash at the end....where do I sign?

The figures on the Endowment Illustrations came from nowhere else BUT the Life Insurance Companies.

And what about cancelled contracts that have already been compensated.....What happens if at the end of the contract an embittered ex IFA finds out that had the Endowment run it's full course it would have realised the amount required, does the customer have to give the money back?

Surely IFA's can not be the only ones that are responsible.

Big Business has got away relatively scot free while putting the blame on small businesses and even smaller individuals.

We were the ones that first rang the alarm bells with the bullshit claims we were getting from the Life Inspector (Insurance Company Salesmen who persuade us to use their products) started to look too far fetched for comfort

To add insult to injury I have heard stories of Ex IFA and Insurance sales team managers, working in the Endowment claims "Industry"

WE (The UK Public) all thought "Which Magazine" were brave souls taking on the might of the Banks and Insurance companies ............but I guess that at some point the must have agreed to take the heat off them and hit the little guys instead.

And the home owners?.....No point in throwing good money after percieved bad and giving the Life Companies even more of your money mis-handle......their easiest answer is to put 50.00 a month into National Savings and build an emergency fund. If at the end of your mortgage it's not needed........well then give to a deserving charity.

Surely there is some brave, justice minded journalist out there willing to take up the cudgels for us....and when it gets started, this story will run and run.

Bob Cratchit

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Some of the blame has to lie with the agent, as they received commission on every policy sold. Some agents (and no espersions are cast on your character in that comment), knowingly missold policies and collected hugh bonuses/commission fees, aware that they would have left the industry once the policies started to mature.

Learn to snip ffs.

FFS learnt to post properly you d*****ad. Snip irrelivant material and quote previous which is relivant.

And they had no influence whatsoever on the performance of the policy. All they could use to indicate future performance was historical results, which were favourable at the time.

"legal eagle" wrote

And perhaps you should learn to spell?

"legal eagle" wrote

But don't forget:- "Past performance is no guide to the future..."

Excuse me but you are just repeating phrases that you have read in the press

Misselling is a claptrap word in this context. Do you imagine there are

2 types of customer?

1. One that doesn't mind losing money
2. One that does

The Huge bonuses/commission fees you mention are spread out over a 4 year period during which customers are bombarded with literature from the Life Insurance companies re-inforcing the belief that they are not only going to pay off their mortgage but have money over to "realise their dreams"

You should be aware that commissions on Endowments were half the amount of commissions on straight Life Insurance, but against the advertising at the time the majority of customers opted for endownments and now regret it. And expect IFA's to take the blame for falling for the Life Insurance Companies mis-advertising.

As for your point "leaving the industry after they mature" as I said at the beginning of this thread, Ex IFA's are STILL responsible.

BTW there are companies that are taking advantage of the media induced panic. These companies buy or auction endowments to NEW investors who get all the money that the ORIGINAL Investor WOULD have got. Plus the added bonus that if the ORIGINAL Investor dies earlier........this NEW investor gets his money quicker and the ORIGINAL family gets nothing on the death of a partner.

 Regards Bob Cratchit stiil working after 163 years

surely the way forward in this is to defend individual cases on the basis that they were not missold i.e. customer was properly informed of risks, sono non-disclosure or lack of understanding, plus, crucially, the policy as it stood was suitable AT THE TIME.

I know this own't deal with everything, but it will give complainants a good run for theior money and will defeat a fair few claims.

I have successfully defended such claims against major insurance companies, where the policy was sold by a salesperson rather than an IFA. It seems to me that complainants have a harder task than is sometimes recognised, at least if the defence is competently conducted.

Andrew McGee

Damn, I often get that word wrong. Thanks for the pointer. Must handwrite a thousand times, each.... irrelevant, relevant, irre..

Exactly.. IIRC similar wording was included on most (if not all) industry literature, something like...

'Past performance is no guarantee of future results.'

Do you have an URL(s) to any news item please?

No. I don't. I wish I could find a Blog or NG where these sort of things are discussed.

I don't know about you but when I applied for a mortgage the IFA clearly didn't understand the product and appeared to be basing his advice solely on his commission. I believe it is right and proper that such people are held to account.

I know that when I looked at endowments in the late 80's I made the assessment that they were a poor choice compared to repayment.

It would appear that you were an IFA and if so were NOT an agent of any life company. Therefore you were (or should have been) acting in the client's interests. If you fell for all the advertising hype then you were on the same level as the customer. Surely the adviser's job is to find out what's best for the client, regardless of what any life company is saying. If you honestly felt that an endowment was the best thing for the client, and explained to him why and also explained that there were risks involved and what these risks were, then you have nothing to worry about. But if you didn't, then a client might well feel aggrieved that a professional whom he had consulted did not do his job properly.

Rob Graham

Hindsight is a wonderful thing..........who would recommend endowments now? but at the time......All financial pundits said how great they were and had past results to back them up.

Even the newspapers were in on the act, carrying stories of how repayment mortgages were really "Yearly Amortization" mortgages where you actually continue to pay interest on money that has already been paid back due to the fact that the capital paid is only deducted from the mortgage once a year.

What other group of professionals is hounded in this way?

The dental profession in the 1960's thought it was a great idea to load my natural teeth with silver fillings....whether they needed to or not.. at £30.00 a go via the NHS

That was then this is now

Your IFA must have been a silly billy.......contrary to popular myth, endowments paid half of the commision that a straight life insurance policy paid.......and during my time in the Life Insurance business, I never met a widow who said her husband had too much Life Cover!

Well thats just not true unless you could see into the future...when you looked at endowments in the late 80's, they not only looked wonderful......the combined might of Insurance Companies, Banks, Govt regulators and Financial were screaming that they were...........They should be all be held to account along with IFA's

Very hard to urge caution in imprudent times.

Bob

"Richard Phillips" wrote

No, try using a little bit of logic. Interest rates high (1) repayment mortgage better due to repayment of capital which reduces interest on loan. (2) endownment very bad because no capital is repayed, so you pay more interest on the loan.

Interest rates low (1) endowment as good as they could ever be, since the extra interest payments on the loan are less

Endowments are bad because the corrupt scummy IFA which sold them made huge commissions on them, which us suckers have to pay for over many years.

P.S. The OP probably earned huge commissions by persuading (aka conning) people to buy Endowments, if he becomes bankrupt then that is justice in action. This issue has helped to completely destroy public trust in financial advisors.

Yes he clearly didn't understand financial mathematics. What has Life Insurance got to do with it?

It was a bet that the stock market would outperform the mortgage rate (which averages maybe 2 to 3 % points above bond rates). On top of this were the endowment management charges and penalties for early redemption.

To base a decision upon a couple of years of a boom market was ludicrous.

Not if you are really giving impartial advice and know what you are doing.

So when the insurance company quotation said that you would get enough to pay off your mortgage plus some extra..........you told them where to shove it......yeah right.

No.......you made a decision based on what you had read in newpapers and mags.......at the time.

Don't believe me??????? Imagine an IFA with an appointment at your house tonight to talk about endowments..........because of what you have read you would not let him in now.

10 years ago you would have

I've often wondered how an adviser can be called 'independent' if he gets a commission on sales, whatever the percentage.

In the old days one got full tax relief on mortgage interest.

You also used to get tax relief on the endownment policy

Which was bad because you were missing out on tax relief. which you could then invest and pay off the laon.