One month after sending them the details, the Financial Ombudsman Service sent me a letter saying that "..your complaint does not appear to be one we would deal with because we can only consider complaints against Indpendent Financial Advisers where the advice was given after 29 April 1988..".

Not good enough, I will consider who next to raise this with. Should anyone have any suggestions please drop me a note.

Was this a scam or not?

Your views, please, on the following correspondence between myself and The Times; concerning a solicitor's scheme to help endowment holders that came to nothing:

My note 5 Dec (extract):

"...I received this note from a visitor to my website yesterday. As an experienced auditor and fraud investigator, my instincts tell me that something is not quite right (assuming the facts of the note are correct)....

Maybe you could do a little discrete digging?

Extract of note:

".... Two years ago while pondering which way to go with a claim about an endowment sold to me in 1990, I saw an article in The Times entitled "Lawyer helps endowment victims to sue". The legal firm, (edited out), appealed for mortgage holders to take a group action against insurers and advisers. I took the bait and paid a fee of £375. After prevaricating for two years they now say they are not going to proceed and have advised me and I presume the other 250-odd in the group that: you have the option to 'make a complaint yourself'' !!! I would be interested to know if there are others in the group visiting your site. I will now make a claim direct if I haven't missed the boat..."...."

The Times responsed 7 Dec saying that they had talked to the solicitor, and that the scheme was being suspended because they were unable to obtain legal expenses insurance. The Times was advised that people would get their money back.

My note to The Times 8 Dec (extract):

"...Many thanks for looking into this.

.... The note I received from my visitor says some 250 people sent money to this company.

So 250 at £375 per head gives £93750 which at say 5% pa over two years gives £9375 in interest; nice money for doing no work!

Maybe the solicitors should pay back the interest as well?..."

Yesterday I received a letter from Company A, dated 6 Dec, regarding the progress wrt my complaint. Extract:

"..I regret that we are are still not in a position to give a final response to your complaint because we are still in the process of collating the relevant information...If you have not yet completed and returned the documentation enclosed in our original response...please would you do so (editorial note: if they were processing it in a logical manner they would know that I had completed the documentation, after all this gives details of the mortgage etc).....I expect to be able to provide a final response ..by 31st January 2003...If you are dissatisfied with the delay..you may refer the matter to the Financial Ombudsman Service.."

As I noted in an earlier post, it appears that the administration systems cannot cope with the level of complaints.

Extract of letter sent to the FT today:

"..Sir,

It is encouraging to see the FSA take some action against one of the firms accused of mis-selling endowments. However, I disagree with Sir Howard Davies’s comments as per today’s FT; that it would be wrong to foster a regime that compensated people for investments not performing as people would like.

Endowments, when they were proactively marketed in the 1980’s and 1990’s, were treated by the mortgage and life assurance industry as products not investments; no different from a television or a car. They were, as the industry had us believe, designed to pay off the mortgage and provide a tax free surplus at the end of the term.

I am keeping an on line diary of my progress in obtaining redress against two companies who mis-sold me two policies; on my website http://www.kenfrost.com under the section The Endowment Diary. As is clear from the feedback that I have received; the consumer bought endowments as products, not investments, and took the companies at their word with regard the expected performance of these products.

Therefore, since they were marketed as products, they should be covered by consumer legislation. When you buy a car, designed to take you from A to B, and it irrecoverably breaks down (ie it was not of merchantable quality or “fit for purpose”); you take it back and obtain a replacement that works. The same principle of “fit for purpose” applies to endowments.

It is clear that they have proven to be “not fit for purpose”. Therefore, in my opinion, the basic principles of consumer legislation apply; and the relevant life assurance companies should underwrite the policies, and pay the shortfall between mortgage debt and endowment yield at the end of the term..."

I received the following from a visitor today, together with a large attachment. Unfortunately my email account couldn't handle the size, and seized up until I deleted the attachment. I have asked for it to be posted on The Forum instead. So keep a look out.

In the meantime, I would be interested to know if anyone else has lost money in similar circumstances?

Extract "...Hi Ken

I'm another victim of mis-selling. However, I have a novel twist because I seem to have been sold a pup twice. Two years ago while pondering which way to go with a claim about an endowment sold to me in 1990, I saw an article in The Times (copy attached) entitled "Lawyer helps endowment victims to sue". The legal firm, (edited out), appealed for mortgage holders to take a group action against insurers and advisers. I took the bait and paid a fee of £375. After prevaricating for two years they now say they are not going to proceed and have advised me and I presume the other 250-odd in the group that: you have the option to 'make a complaint yourself'' !!! I would be interested to know if there are others in the group visiting your site. I will now make a claim direct if I haven't missed the boat.

Your site is an excellent idea.

Good luck..."

I see that the FSA has fined Abbey Life £1M for mis-selling endowments between 1995 and 1999. Nice to see some action, albeit it a little slow, taking place.

As a consequence, Lloyds TSB has set up a £165M provision to cover compensation payments to an estimated 50000 customers; who were mis-sold their policies.

Now how about the FSA making a ruling on the other companies who mis-sold these products; which are clearly not “fit for purpose”.

I received a note from one of my visitors yesterday which, in my opinion, is a good example of the issues and problems facing the poor endowment holder. I have attached extracts of the emails between myself and my visitor.

1 Dec "Hi Ken
Just to let you know I heard from the Ombudsman last Friday saying they can do nothing for me. My policies were 1986 and 1987.
I also had a policy from 1990 which I accepted a settlement on a couple of years ago. I did not proceed with a complaint about the earlier policies because I did not realise I could take these to the Ombudsman then.
I worked my way through "the major building society's" (editorial change) complaint procedure and after receiving the final letter from them I contacted the Ombudsman in April.
They wrote to me in July saying I was out of time. I wrote back explaining I had followed the procedure and had my final letter telling me I could go to the Ombudsman.
Ombudsman wrote back saying they would send my letter to "the major building society" (editorial change). When I had heard nothing for 2 months I e-mailed them at the beginning of November. Apparently "the major building society" (editorial change) reply was lost in the post!
The Ombudsman suggests I was out of time and should have sent the complaint in 2 years ago. They also say they believe I was only worried about the falling value. They did not see my complaint as mis-selling. I have been told I can take them to court but I am retired for Gods sake! How do I pay for that!
I will just have to put it down to experience.
All the very best with your claim....."

my reply 1 Dec "....What a disgrace! I must admit I am expecting the Ombudsman to reject my claim against B as this was pre 1988. It is not clear, to me anyway, as to which body you are then meant to take your complaint.

I will cross that bridge when I come to it...."

2 Dec to me "...Hi Ken Its my understanding that if the ombudsman rejects a claim the only step then is to take the endowment company to court. I believe the small claims court has a limit of £5000 and I would suspect most people's endowments are greater than that. Most little people would be unable to take on the big firms, they wouldn't have the endowments in the first place if they had that sort of finance..... I shall continue to watch you site with interest. All the best...."

My reply..."I am not entirely certain about what options there are after the Ombudsman. I take your point about the costs (and let us not forget the stress) of going to court, it seems to be a catch 22 situation.

Re your specific case wrt endowments purchased prior to 1988, I think the Consumer Association website has the address of another body; which they imply (though not very clearly) may deal with these. I think, if memory serves, it is called the Financial Services Compensation Scheme.

As an alternative, you could try the technique of shaming the firms into doing something by writing to eg The Times, the Consumers' Association and BBC's Watchdog (the latter have a website through which you can submit your complaint, www.bbc.co.uk/watchdog I think). However, there are certainly better things to be doing with one's life!......

You may enjoy reading my articles on corporate governance and leadership, on "In Your Face", as a distraction from this. Maybe the Boards of our endowment companies should read them as well!..."

I would very much appreciate clarification from anyone out there in cyberspace as to whom one is meant to complain to about endowments sold pre 1988, if both the sales comapny and Ombudsman reject the claim. I know that The Consumers' Association are watching this site, please coud you guys clarify this?

One of my visitors sent me note pointing out, that whatever the Financial Services Act says; company B owes me a duty of care. He is quite right.

I will be interested to see if the Ombudsman takes up my case or drops it, as the policy was bought pre 1988.

I received an unsigned acknowledgement letter (dated 20 November) from the Financial Ombudsman service this morning. This has prompted me to ponder on the timescales and workload involved in processing claims.

On the assumption that The Times estimate is correct, there are between 5 million to 6 million underperforming endowment policies. Let us make the following assumptions (drawn from thin air, I admit):

 Take the lower figure, 5 million.

 10% of endowment holders bother to lodge a claim with the Ombudsman, that is a very conservative estimate; this would give rise to 500000 claims. Which no doubt, human nature being what it is, will be lodged at the last minute.

 The processing of the claim by the Ombudsman would include in my opinion (as a professional accountant), the following steps as a minimum:

- Opening the letter

- Opening a claims file

- Registering the file on a control log

- Reading the claim form and attached contents

- Entering pertinent details into a database

- Verifying key details to supporting evidence

- Contacting the life assurance company

- Contacting the financial adviser who sold the policy

- Reviewing the validity of the claim

- Making a decision as to whether the claim is justified

- Calculating the award

- Authorising the award

- Quality control/review the decision making process

- Informing the relevant parties

- Enforcing the decision etc…need I go on?

It is my very conservative estimate that in total the above steps would take 1 man day per claim, from start to finish, or 500000 man days in total.

There are 365 days in a year, of which 104 are weekends, 8 are bank holidays and 25 (or so) are holidays. That leaves approximately 228 working days a year.

So, 500000 divided by 228 gives us 2193 man years to process these claims.

I would suspect that by then we, and our loved ones, have all died; and the homes, on which the mortgages, are secured have crumbled to dust.

Of course these are just figures plucked from the air, maybe the Ombudsman is much faster at processing claims than I have suggested!

I sent the form and copies of other relevant documents off on Monday..we shall see what happens.

One visitor has made a post on The Forum which makes some very good points.

I have posted a public reply on The Forum which I would appreciate to hear your views on.

To me this whole sorry saga shines an uncomfortable "light of truth" (am I being a little too melodramatic?) on some of the key problems, facing individuals trying to make the best of their finances in "modern well regulated" Britain:

1 The inadequate compensation offered by those firms who mis-sold policies.

2 The fact that the FSA appears to be sitting idly by and taking no action to force Life Assurance firms to underwrite the endowments.

3 The lack of sensible options offered to an individual who is facing a shortfall.

4 The lousy rate of returns on savings being offered by banks; higher rate tax payers in many cases receiving negative returns.

5 Dare I mention pensions?

Is it any wonder that we as a nation are berated (by our "ever popular" government) as being poor at saving and hungry for credit...a financial system in which people have no faith is treated with contempt, as are the people who regulate it. See my related article on corporate governance (In Place of Strife) on my "In Your Face" site.

This is a very dangerous situation, I fear for the future. I know, this is a truism!

If the above contains spelling and other errors I apologise, I am writing with fire in my heart (how hackneyed!); straight into the diary rather than first putting it through Word.