Sauce For The Goose
It is refreshing to read for once a story about a life assurance company suing a broker for mis-selling, rather than an endowment policy holder suing a broker or life assurance company.
In this particular case Standard Life sued brokers Aon for advising it to take out the wrong indemnity insurance, to cover claims for mis-selling of mortgage endowments policies.
I would venture to suggest that had they not mis-sold the policies in the first place, they would not have needed to take the cover out!
Standard Life won the case and stands to gain £75M, the final amount will be determined at another hearing.
The judge ruled that Aon had been negligent, as no reasonably competent broker could have concluded that Standard Life's needs were clearly met by the policy.
I can't but help feel a small amount of shadenfreude over this.
Now at least one life insurance company may know what the millions of us, who were sold these useless underperforming endowments, feel like.
Showing posts with label broker. Show all posts
Showing posts with label broker. Show all posts
Wednesday, February 27, 2008
Thursday, July 28, 2005
Mortgage Advisory Centre In Liquidation
Mortgage Advisory Centre In Liquidation
Mortgage Advisory Centre, based in Edinburgh, run by Robert McGrail, a businessman and shareholder in Hearts football club, has reportedly gone into liquidation.
The Financial Services Authority is expected to issue a statement about the firm, within the next few days. It is unclear how many customers have complained about endowment mortgages sold by the company.
Mr McGrail is reported to control the independent broker First Mortgage Direct.
Mortgage Advisory Centre, based in Edinburgh, run by Robert McGrail, a businessman and shareholder in Hearts football club, has reportedly gone into liquidation.
The Financial Services Authority is expected to issue a statement about the firm, within the next few days. It is unclear how many customers have complained about endowment mortgages sold by the company.
Mr McGrail is reported to control the independent broker First Mortgage Direct.
Saturday, November 06, 2004
The New FSA Regime
The Financial Services Authority (FSA) now regulates the mortgage market.
The theory being that the scandals of the past, ie the endowment mis-selling scandal, will be avoided in the future.
However, regulation comes at a price; especially when the FSA is involved.
It is reported that there have been quite a few teething troubles with the new regime.
It seems that many mortgage brokers have not received their firm's mortgage authorisation number, which is provided by the FSA.
Some lenders have experienced problems with their IT systems, and consequently have not produced documents on line.
Others have refused to provide certain documents, as they believe that this will breach the Data Protection Act.
It is estimated that the cost of the new regime, £100 per application, will be placed fairly and squarely on the shoulders of the consumer.
That's you and me folks!
The Financial Services Authority (FSA) now regulates the mortgage market.
The theory being that the scandals of the past, ie the endowment mis-selling scandal, will be avoided in the future.
However, regulation comes at a price; especially when the FSA is involved.
It is reported that there have been quite a few teething troubles with the new regime.
It seems that many mortgage brokers have not received their firm's mortgage authorisation number, which is provided by the FSA.
Some lenders have experienced problems with their IT systems, and consequently have not produced documents on line.
Others have refused to provide certain documents, as they believe that this will breach the Data Protection Act.
It is estimated that the cost of the new regime, £100 per application, will be placed fairly and squarely on the shoulders of the consumer.
That's you and me folks!
Tuesday, October 19, 2004
Secret Commission Payments
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
Friday, May 14, 2004
I see that the rules relating to compensation payments for mis-selling, may be adjusted by the end of this year.
The new rules will cover consumers who have lost money, because they have been mis-sold a product such as an endowment policy, or have been given poor financial advice.
The scheme will replace the voluntary arrangement currently practiced by brokers et al, and will come into force from October 2004.
The new rules will cover consumers who have lost money, because they have been mis-sold a product such as an endowment policy, or have been given poor financial advice.
The scheme will replace the voluntary arrangement currently practiced by brokers et al, and will come into force from October 2004.
Monday, August 04, 2003
Extract of letter from A dated 29 July 2003 (relating to complaint about mortgage sold by A):
“I refer to my letter dated 13 June 2003. I have now investigated the issues raised in your letter dated 2 June. Please accept my apologies for the delay in replying, however, I was awaiting technical guidance.
I would like to address each issue you have raised one by one.
You state that you believe that your policy was mis-sold as you feel that A procedures should have investigated the incomplete fact find. The fact find is used as a tool to document client details and it was not mandatory for all questions to be completed. Therefore, omission of the section that deals with investment attitude does not constitute evidence of a mis-sale.
You state that it is a contradiction in my assessment of your attitude to risk as being low as I state that there is a risk with your policy. Low risk means that you are prepared to take some risk, this does not mean that you are risk avers (no risk).
It was not a regulatory requirement for insurance companies to state what commission the advisor would receive from the sale of your policy. However, the fees an charges applicable to your policy would have been outlined in the policy literature that was sent with our illustration.
From our records, it appears that you were already in the process of setting up your interest only mortgage directly with ***. From the application form that *** have provided us with, it appears that methods of repayment were already discussed under section 19. As you mortgage had already been set up, you had a deficit in cover that needed to be replaced as ** have confirmed that they required an endowment policy to cover the whole mortgage amount.
You have quoted a A financial quote at the time. You have stated that an endowment policy is designed to repay your mortgage and also provide an additional cash sum. This is what it is designed to do but it is not guaranteed and I can not find any evidence of a guarantee in the quotes provided. The fact that your previous employment was a chartered accountant also leads me to conclude that you had a substantial knowledge of the financial industry and would have understood the literature and the illustration provided at the time of sale.
You have quoted a court case where David Barker cited a 1965 Court of Appeal judgement by Lord Denning, which rules that a verbal statement could be considered a warranty. Verbal and oral evidence can be used as evidence when investigating complaints but we must take into consideration the written evidence on our records. Our file holds an illustration that was sent to you (at your request) which confirms the possibility of a shortfall at maturity and does not give any guarantees. The policy literature that was also sent to you at your request also does not give any guarantees with endowment policies.
You state that you were told in a letter dates 30 April 2003 from my colleague that a consultant would explain the reasons for the delaying completing your case. However, the letter states (your case has now been passed for investigation. A customer relations consultant will be in contact shortly”. This does not state that we would explain the delay but after our investigation into your complaint, we would be contacting you shortly in response to your complaint. I apologise if this letter caused some confusion.
I apologise that your endowment file was not enclosed with my letter dated 15 May 2003. Please find enclosed the application form dated 10 November 1991 etc..
Finally, you have queried why you would have opted for an endowment policy if it were not going to repay your mortgage. I have assessed you as having a low attitude to risk, this means that you are prepared to take a risk with your investment for the possibility of a cash surplus at maturity.…”
Extract of letter from A dated 31 July 2003 (relating to complaint about mortgage sold by B):
“..I apologise on behalf of A for the delay in replying.
I can confirm that at the time of sale there was no relationship between ourselves and B, they were an independent financial broker. The reason they were not acting as an agent for the society was, as stated previously, they ere independent and therefore not acting on behalf of us as a provider.
I note from your letter dated 15 July that you have registered a formal complaint with the Financial Ombudsman.
With regard to your reference to the law of agency, the independent financial broker was acting for the client and not for ourselves….”
“I refer to my letter dated 13 June 2003. I have now investigated the issues raised in your letter dated 2 June. Please accept my apologies for the delay in replying, however, I was awaiting technical guidance.
I would like to address each issue you have raised one by one.
You state that you believe that your policy was mis-sold as you feel that A procedures should have investigated the incomplete fact find. The fact find is used as a tool to document client details and it was not mandatory for all questions to be completed. Therefore, omission of the section that deals with investment attitude does not constitute evidence of a mis-sale.
You state that it is a contradiction in my assessment of your attitude to risk as being low as I state that there is a risk with your policy. Low risk means that you are prepared to take some risk, this does not mean that you are risk avers (no risk).
It was not a regulatory requirement for insurance companies to state what commission the advisor would receive from the sale of your policy. However, the fees an charges applicable to your policy would have been outlined in the policy literature that was sent with our illustration.
From our records, it appears that you were already in the process of setting up your interest only mortgage directly with ***. From the application form that *** have provided us with, it appears that methods of repayment were already discussed under section 19. As you mortgage had already been set up, you had a deficit in cover that needed to be replaced as ** have confirmed that they required an endowment policy to cover the whole mortgage amount.
You have quoted a A financial quote at the time. You have stated that an endowment policy is designed to repay your mortgage and also provide an additional cash sum. This is what it is designed to do but it is not guaranteed and I can not find any evidence of a guarantee in the quotes provided. The fact that your previous employment was a chartered accountant also leads me to conclude that you had a substantial knowledge of the financial industry and would have understood the literature and the illustration provided at the time of sale.
You have quoted a court case where David Barker cited a 1965 Court of Appeal judgement by Lord Denning, which rules that a verbal statement could be considered a warranty. Verbal and oral evidence can be used as evidence when investigating complaints but we must take into consideration the written evidence on our records. Our file holds an illustration that was sent to you (at your request) which confirms the possibility of a shortfall at maturity and does not give any guarantees. The policy literature that was also sent to you at your request also does not give any guarantees with endowment policies.
You state that you were told in a letter dates 30 April 2003 from my colleague that a consultant would explain the reasons for the delaying completing your case. However, the letter states (your case has now been passed for investigation. A customer relations consultant will be in contact shortly”. This does not state that we would explain the delay but after our investigation into your complaint, we would be contacting you shortly in response to your complaint. I apologise if this letter caused some confusion.
I apologise that your endowment file was not enclosed with my letter dated 15 May 2003. Please find enclosed the application form dated 10 November 1991 etc..
Finally, you have queried why you would have opted for an endowment policy if it were not going to repay your mortgage. I have assessed you as having a low attitude to risk, this means that you are prepared to take a risk with your investment for the possibility of a cash surplus at maturity.…”
Extract of letter from A dated 31 July 2003 (relating to complaint about mortgage sold by B):
“..I apologise on behalf of A for the delay in replying.
I can confirm that at the time of sale there was no relationship between ourselves and B, they were an independent financial broker. The reason they were not acting as an agent for the society was, as stated previously, they ere independent and therefore not acting on behalf of us as a provider.
I note from your letter dated 15 July that you have registered a formal complaint with the Financial Ombudsman.
With regard to your reference to the law of agency, the independent financial broker was acting for the client and not for ourselves….”
Saturday, March 15, 2003
I received a letter today from company A, in respect of my complaint about the mis-selling of my first endowment policy. Extracts as follows:
“…I am sorry to inform you that A are unable to investigate your complaint, as the advice you were given on the sale of the above plan was by an Independent Financial Broker (editorial note this was company B)…
B were not acting, as agents of A but were your own chosen Financial broker…we had no control over the advice that they gave you…
If you feel that you have received an unsatisfactory reply from B, please contact the Financial services Ombudsman service…”
I have the following initial observations:
1. I am sure, but will check my records, that B would have been receiving commission payment for selling A’s policies. This, at the very least, would place them in a quasi agency role.
2. The advice re contacting the Ombudsman is spurious, I have already done so and was told that as the policy was sold in 1987 the legislation does not cover my claim. Indeed the Ombudsman recommended that I contact A!
3. I detailed the last point in my original letter to A, even including the correspondence between myself and the Ombudsman together with the detailed endowment complaint questionnaire. The fact that A now recommends me to contact the Ombudsman indicates to me that they have not read my letter.
This is not the end of the matter as far as I am concerned. I will go through my records and decide what to do next.
“…I am sorry to inform you that A are unable to investigate your complaint, as the advice you were given on the sale of the above plan was by an Independent Financial Broker (editorial note this was company B)…
B were not acting, as agents of A but were your own chosen Financial broker…we had no control over the advice that they gave you…
If you feel that you have received an unsatisfactory reply from B, please contact the Financial services Ombudsman service…”
I have the following initial observations:
1. I am sure, but will check my records, that B would have been receiving commission payment for selling A’s policies. This, at the very least, would place them in a quasi agency role.
2. The advice re contacting the Ombudsman is spurious, I have already done so and was told that as the policy was sold in 1987 the legislation does not cover my claim. Indeed the Ombudsman recommended that I contact A!
3. I detailed the last point in my original letter to A, even including the correspondence between myself and the Ombudsman together with the detailed endowment complaint questionnaire. The fact that A now recommends me to contact the Ombudsman indicates to me that they have not read my letter.
This is not the end of the matter as far as I am concerned. I will go through my records and decide what to do next.
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