The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Monday, September 29, 2003

Here is an extract of the letter I have sent to the Ombudsman today, in response to their letter received on Saturday:

"Thank you for your letter (dated 26 September) in respect of my complaint against A (Ref ****).

I note the contents, and have the following observations; which I will make in the same order as the points raised in your letter:

 You note that there was a 6 week gap between my enquiry about the policy and completing the paperwork. The inference being, that this delay was due to me taking time to consider the arrangement. The delay was in fact due to a number of problems arising with the sale of my apartment, and the purchase of a new apartment. My time and effort was being devoted to resolving these problems.

 A proceeding with the sale of the endowment despite the non completion of part of the fact find, whether legally mandatory or not, was a breach of their own internal procedures. They have admitted this; as such it constitutes a mis-sale by their own rules and procedures.

 You note that I was already in the process of setting up an interest only mortgage, and that section 19 of the *** form shows that methods of repayment were discussed. I would draw your attention to the fact that I already held an endowment mortgage, which was set up in 1987. The endowment policy taken out in 1991 was to increase the size of my mortgage to finance my apartment move. Section 19 shows that I was offering my existing endowment policy as part of the financing of the increased mortgage, I was not discussing alternatives with a ***.

 You note that I had already held an A policy taken out in 1987. However, A have stated to you that I have not complained about this; and that, based on this statement you question why I am complaining about the 1991 policy. A’s statement to you is incorrect. I have complained to both A and your own organisation about the 1987 policy; the complaint was rejected because the policy was taken out pre 1988. I am at a loss understand why A have “forgotten” this, and have told you that I have not complained. I have copies of all correspondence with both A and yourselves; I am happy to provide you with these should you require them.

 You note that I currently hold shares, and that this indicates that I am an investor who is prepared to take some risk. I would note that when I took out the endowment polices in 1987 and 1991 I did not hold shares. To compare my current investment and risk attitude, with my investment and risk attitude of 12 or more years ago is akin to comparing apples to bananas; it is not a valid line of reasoning.

 You note that there is no guarantee in the A sales brochure that the mortgage will be paid off, and as such the “Denning judgement” is not applicable. I draw your attention to the following paragraph in the brochure:

“By taking out an A Build Up Mortgage plan you can be assured that you are making the right decision…investment into an endowment life assurance policy offers you the prospect of a substantial surplus cash sum after the mortgage has been repaid”.

The use of the word “assured” and phrase “after the mortgage has been repaid” makes it clear that the mortgage will be repaid. I contend that this constitutes a warranty, and that the “Denning judgement” applies.

In conclusion, there would be little point (for any rational individual) in taking out an endowment policy if it were not going to pay off the mortgage.

A marketed these polices like cars and TV’s; ie a product with a defined function, namely, to pay off the mortgage. A by selling them as a product with a defined function, not as an investment, have by definition mis-sold them. The policy has been shown to be not “fit for purpose” as it will not cover the mortgage; and as with any product, not “fit for purpose”, the supplier should compensate the consumer for defects in manufacture.

In view of the above points, I would like to ask you to re-evaluate your conclusion. Please feel free to contact me should you require further information.

Thank you in advance for your time and assistance in this matter...."

Saturday, September 27, 2003

I received a 3 page letter from the Financial Ombudsman Adjudicator today, regarding my complaint about the mis-selling of my second endowment.

It states that they will not uphold my complaint, and lays out the reasons why.

Their reasoning, I have to say, is somewhat lacking in intellectual rigour (indeed one point they make could not be more factually incorrect). Their reasons include the following:

 The fact that I took 6 weeks from first starting to arrange the mortgage to actually completing it (the house purchase took longer than expected).

 The incomplete fact find performed by A is not evidence of mis-selling (it does represent a breach of A’s procedures).

 As I now hold shares I am an individual who takes risks (to compare my investment and risk position now with my investment and risk position 12 years ago, when I took the policy out, is absurd).

One particular paragraph of the letter made my jaw drop in amazement:

“I have noted that in 1992, you already held an A endowment policy for a target of ** which had been taken out in 1987. I understand that this was also a “With Profits, Build Up” policy and yet I have been informed by A that you have not complained about this policy. In particular you don’t appear to have questioned the suitability of this product. In view of this, I would question why you have complained that the endowment taken out in 1991 was not suitable for you.”

As those of you who regularly read this diary know, nothing could be further form the truth. I have complained:

 to B who sold me the policy

 to A with whom the policy resides

 and to the Ombudsman.

All 3 stated that, as it was sold in 1987, the current law does not apply; and I have no grounds for redress.

I am at a loss to understand how both A and the Ombudsman could forget this lengthy, and detailed, correspondence.

I will compose a detailed point by point rebuttal over the next few days; and post it to the Ombudsman, and to this site.

Evidently the Ombudsman is so overwhelmed by complaints, that fatigue is setting in; and serious errors are being made.

Thursday, September 25, 2003

According to the recent survey carried out by the Consumers' Association; less than half of those people, who complained to the companies who sold them an endowment, bothered to raise the matter further with the FSA if their original claim was rejected.

Come on guys!

If you don't complain you won't get compensation; the companies who sold you the policies, more often than not, need a little "push" from a third party.

It costs nothing, other than a little of your time, to raise the matter with the FSA.

The clock is ticking!

Sunday, September 14, 2003

I received a letter from the Ombudsman yesterday, in respect of my complaint about my second endowment.

The letter advised me that my complaint has now been passed on to the Adjudicator, who will act to try to mediate between myself and A in order to reach a satisfactory solution.

Friday, September 12, 2003

I clicked on one of the services for claiming redress for mis-selling (advertised on the left of this diary), and filled in their brief form wrt the endoment sold pre 1988.

They came back to me today, saying that at the moment they cannot claim for endowments sold pre April 1988.

However, they are looking into the possibility of bringing legal action on behalf of people who were sold policies pre April 1988.

As such they will hold my details, and contact me when they have further information.

Thursday, September 11, 2003

I had a letter from the Financial Services Compensation Scheme today, in relation to my claim for compensation against B.

The FSCS said that as I bought the mortgage before 28 August 1988, they were unable to help me. However, if B had given me further advice after that date they might be able to help.

Nil desperandum!

I will now explore other options.

Sunday, September 07, 2003

I completed the form from the Ombudsman, and sent it off to them.

Let's see how this goes.

Thursday, September 04, 2003

Extract of letter sent to the Financial Services Compensation Scheme today, in respect of first endowment:

"Dear Sir/Madam,

I am writing to ask for your assistance in obtaining financial redress for the mis-selling of an endowment policy by B.

The FSA have advised me that this organisation is no longer authorised to provide investment advice. Please be advised that I have written to B; their compliance and quality control director advised me that they were not authorised, or registered, to carry out a review of my complaint.

I understand from the FSA that, under these circumstances, I should present my case to the FSCS.

The details, by way of a brief overview, are as follows:
- Endowment policy number ...
- Mortgage reference number ...

An adviser from B sold me a A endowment policy in August 1987. The target amount was £35000. The policy is not expected to meet this target.

The basis of my complaint is as follows:

 Other options for repaying the mortgage were not discussed fully with me

 The adviser did not explain there was a risk that the endowment would not meet the target amount

 The adviser did not discuss in full the funds my endowment was to be invested in

 The adviser did not properly establish my attitude to risk

 The adviser didn't fully explain the fees and charges on the policy

 The adviser said the policy was guaranteed to pay off the mortgage

 The adviser said there would be a lump sum in addition at the end of the term.

Please feel free to contact me should you require additional information.
Thank you in advance for your assistance...."

Tuesday, September 02, 2003

Received a letter today from the Ombudsman, relating to my complaint about the mis-selling of my second endowment.

The complaint has been passed on to their casework area for further consideration.

They also enclosed a detailed questionnaire, which I will fill out and return in the next few days.

Monday, September 01, 2003

I received a rather unhelpful response from the FSA, a few days ago, in connection with my enquiry as to the relationship between A & B that existed at the time I was sold my first endowment.

The FSA stated that they could not respond to all queries individually. They then went on to answer a question that I didn’t raise; namely providing me with the contact details of B, and noting that B was no longer authorised to provide investment advice (both of which I knew already).

Clearly no one at the FSA had bothered to read my letter!

Then for good measure, they enclosed a number of leaflets and an expensive booklet; about the role of the FSA, and how to complain.

I wouldn’t mind, but it was the Financial Ombudsman Service (not entirely unconnected to the FSA) that advised me to write to the FSA in the first place.

This sorry performance begs the question; if the FSA cannot provide answers to questions raised by members of the public, with respect to the activities of organisations operating under the remit of the FSA, then precisely what is the FSA there for?

I think that I may give the FSA one of my “Worse Than Worthless” awards.

I will be passing my complaint about B on to the Financial Services Compensation Scheme; which handles issues relating to companies which are no longer authorised to give investment advice.