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

Yes, I did. I knew how endowments worked, and I knew how repayment mortgages worked and I knew what I wanted well before I even applied for my first mortgage.

I must have had half a dozen calls to "confirm" that I really wanted an endowment, not a repayment, because nobody would consider a repayment when even in the worst case endowment would leave me so much better off.

Judging by an endowment my partner took out at about the same time for about the same amount I would expect the endowment to have almost paid off the mortgage in another 10 years or so.

Instead I've got no mortgage, and any money I save is available for me and doesn't have to be put aside to cover any possible shortfall. My partner also has no mortgage so she'll get whatever the endowment pays out - which looks like it will be slightly less than she would have got if she'd paid the money into a high interest deposit account instead of an endowment so what she's done effectively is given up access to the money and ended up with a lower return!

My brother was in a final salary pension scheme. His comment to some of his collegues when they couldn't understand why he didn't want to transfer to a money purchase scheme "You're relying on the performance of the stock market for the next 40 years; I'm relying on $BIG company still being around." And their reply "but there's no way you won't be better off in the money purchase scheme"

Of course, it's people like me who have been hit here. I wasn't mis-sold my pension[1] but I am now seeing little or no bonuses being awarded, partly because of the compensation being paid to those who were mis-sold.

Tim.

No, I was a sucker and signed up, I trusted the IFA. Did not know anything about about finance at that time (I was young). Having had that experience, I would never trust an IFA again and wish that those greedy scum go to hell.

P.S. I accept that some IFAs may not have sold endowments and may have acted in the interests of their clients, but the majority just pushed endowments, just like drug dealers push drugs. Personally I think (if the UK were just) they should be looking at prison for fraud, not merely facing the prospect of bankrucptcy.

What's to stop the agencies from competing with one another to give the most commission? In fact, what's the point in giving commission if they don't do this? Commission is given to a salesman as an incentive for them to sell more of a product.

They were and still are told by the regulator (Currently the FSA) how much they are allowed to pay expressed as a percentage of the yearly premium. So they were all within a narrow range.

Regulators have come and gone. Each one was a Limited company and each one dumped their responsibilities on the next one after they shut down.

FIMRA, PIA, LAUTRO MBBC they have all come and gone and taken their knighthoods with them..........but only the IFA's are STILL answerable.

Where are the crusading journalists?

Bob

In message , Nuclear Winter writes

The majority were NOT sold by IFAs but by tied agents.

In message , IanAl writes

To be called 'Independent' the adviser must offer advice and products from the whole of market AN must of remuneration terms which must include a fee only option.

No, regulators were (& are) funded by those they are supposed to protect public against.

Did you sell more than 20 pensions?

If so, at 5% initial commission, that's a decent start to your own pension.

Did you sell more than 200 pensions?

If so, at 0.5% trail commission, you needn't bother paying in to your own pension.

At least horse-racing tipsters don't continue to take a percentage of punters throwing good money after bad.

If you (or, your estate) had forgone *all* comission/fees in return for, say, 5% of any gains after the 25 years were up, then I might have had more sympathy for you.

rgds, Alan

True, but IMO, it would be cheaper for many folks to study for CII 'qualifications' themselves rather than squander that money on fees *or* commission.

OK, above G60 level, it might be worth paying for, but at that level one could consider hireing one's own actuary rather than paying barrister-level hourly rates for a glorified salesman.

rgds, Alan

"Alan Frame" wrote

Just how cheap do you think an actuary's time is? ;-)

"Bob_Cratchit" wrote

... only those stupid enough to set up as a "sole-proprietor" / "sole-trader".

Why didn't *you* set up as a Limited Co?

To me that is the most interesting question here. It seems that according to the FSA and the FOS the answer is, "Forever." Usually section 14A of the Limitation Act 1980 puts an absolute limitation cap on professional negligence claims (in the absence of proven fraud) at 15 years from cause of action accrued. However, the FSA/FOS claim that their rules are not bound by that legislation. Which means that solicitors who sold a given dodgy endowment mortgage 16 years ago get away with it (they are not regulated by FSA) whereas an IFA is held liable for selling an identical scheme. There could be a Judicial Review/Human Rights Act challenge on this, I reckon.

Bob_Cratchit posted

I expect a lot of them bought endowment schemes and are now bitterly regretting it. The last people they are going to crusade for are the people who sold them down the river.

That's the trouble with making your money by pissing on everybody. You've got nobody to help you when the chickens come home.

Maybe nowadays.

At one point an IFA only had to show that he/she had compared the product with 'one' other.

Neb

In message , Nebulous writes

Yes, I should have made it clear that I was referring to what is only the current definition of IFA.

Ooh, Bob-Cratchit speak half-truths here, as he's not taking account of the different size of the premiums. Commission for term assurance was around

The premium for a typical term assurance might be say 10 or 15 Pounds a month, yielding say 150 Pounds in commission. The typical endowment premium might be say 200 Pounds a month, yielding say 1200 Pounds in commission.

There was a huge financial incentive for salesmen to sell endowments.

Clearly, that would be a proper defence. The problem that IFAs face is threefold:-

1. Their records were often inadequate. As a breed, salesmen are generally more suited to talking rather than writing things down. So, the required warnings were not always put in writing. Bob C does not say whether he has kept all his records from his IFA days. As a self-employed individual, he should of course have done so.
2. They may indeed have been too optimistic about future returns and may have failed themselves to understand the risks. Bob C puts himself in this category, saying that he was misled by the life assurance companies.
3. Sadly, some clients appear to be prepared to 'remember' the salesman saying things that the salesman simply did not say.

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Yes, here:

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.

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I worked as an actuary throughout that period (not in the life assurance industry) and I actively counselled people against taking out endowments.

That statement alone speaks volumes against you.

Half the commission rate but on say 20 times the premium = 10 times as much commission for selling an endowment.

If you used the same half-truths in selling life assurance, no wonder you are in trouble.

This was precisely the argument I used at the time. However, you can also factor in the tax that the life assurance company had to pay on its investment returns, which simply reinforces your point.

Absolutely.