The Decline of The IFA
This is Money reports that 10 years ago there were about 350,000 financial advisers. However, increased regulation and the impact of the endowment misselling scandal has severely reduced their numbers down to 55,000.
It seems that it is not just the hapless policyholders who are paying the price for these underperforming and useless products.
Wednesday, March 29, 2006
Thursday, March 23, 2006
Legal & General U Turn
Legal & General U Turn
Legal & General have announced that they will tell over 600,000 endowment policyholders that they have only six more months to claim compensation, if they believe they were mis-sold the products.
Up until now, L&G now had been one of the few large endowment policy providers to rule out "time-barring" customers.
L&G has started to send out letters to their policy holders this week, covering the new time bar rule and informing the policy holders about their projected returns/shortfalls on polices.
Only Prudential and Nationwide Building Society are keeping an open commitment to consider complaints.
The clock is ticking.
Legal & General have announced that they will tell over 600,000 endowment policyholders that they have only six more months to claim compensation, if they believe they were mis-sold the products.
Up until now, L&G now had been one of the few large endowment policy providers to rule out "time-barring" customers.
L&G has started to send out letters to their policy holders this week, covering the new time bar rule and informing the policy holders about their projected returns/shortfalls on polices.
Only Prudential and Nationwide Building Society are keeping an open commitment to consider complaints.
The clock is ticking.
Tuesday, March 21, 2006
The Dangers of Interest Only Mortgages
The Dangers of Interest Only Mortgages
The Times has a good article about the dangers of interest only mortgages, I recommend that you read it.
The Times has a good article about the dangers of interest only mortgages, I recommend that you read it.
Wednesday, March 08, 2006
The Danger of False Hope
The Danger of False Hope
Ivan Lewis, Treasury economic secretary, has warned that the thousands of Scots who were mis-sold endowment mortgages by solicitors should not hold out "false hope" of obtaining compensation.
Lewis admitted that it was a scandal that a legal loophole prevented those, who bought a policy through a lawyer before 2001, from seeking financial redress in the event of a shortfall
He is quoted as saying:
"One of the difficulties (with a new financial safety net) is it's not retrospective. I do have great sympathy for people who have been caught out by endowment mis-selling in Scotland but there is a genuine problem."
Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service.
The solution is for the life assurance companies, that manage these useless policies, to underwrite them.
Ivan Lewis, Treasury economic secretary, has warned that the thousands of Scots who were mis-sold endowment mortgages by solicitors should not hold out "false hope" of obtaining compensation.
Lewis admitted that it was a scandal that a legal loophole prevented those, who bought a policy through a lawyer before 2001, from seeking financial redress in the event of a shortfall
He is quoted as saying:
"One of the difficulties (with a new financial safety net) is it's not retrospective. I do have great sympathy for people who have been caught out by endowment mis-selling in Scotland but there is a genuine problem."
Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service.
The solution is for the life assurance companies, that manage these useless policies, to underwrite them.
Friday, March 03, 2006
HBOS Hit By Endowment Losses
HBOS Hit By Endowment Losses
HBOS has announced that it made £4.81BN in pretax profits last year.
However, owing to the endowment scandal it had to take a £260M provision for endowment mis-selling.
HBOS has announced that it made £4.81BN in pretax profits last year.
However, owing to the endowment scandal it had to take a £260M provision for endowment mis-selling.
Thursday, March 02, 2006
Lloyds Endowment Hit
Lloyds Endowment Hit
Last week Lloyds reported profits of £3.82BN for 2005.
However, the charge for compensation for paying customers for mis-selling endowment policies rose from £100m in 2004 to £150m in 2005.
Whilst this cost affects the results, and of course the shareholders, I doubt that the people who sold these underperforming and useless products will have been affected; ie the senior managers will still receive bonuses.
Last week Lloyds reported profits of £3.82BN for 2005.
However, the charge for compensation for paying customers for mis-selling endowment policies rose from £100m in 2004 to £150m in 2005.
Whilst this cost affects the results, and of course the shareholders, I doubt that the people who sold these underperforming and useless products will have been affected; ie the senior managers will still receive bonuses.
Wednesday, March 01, 2006
You Have Been Warned
You Have Been Warned
The Financial Services Authority have stated that it is standard practice for endowment providers to continue paying commissions to mortgage advisers, while policies remain active, even if the holders have paid off their mortgage.
This means that even though the endowment policy that you hold may not reach target, the person/company who sold you the mortgage will still be receiving a commission.
This of course will reduce the value of the policy.
Happy with that?
The Financial Services Authority have stated that it is standard practice for endowment providers to continue paying commissions to mortgage advisers, while policies remain active, even if the holders have paid off their mortgage.
This means that even though the endowment policy that you hold may not reach target, the person/company who sold you the mortgage will still be receiving a commission.
This of course will reduce the value of the policy.
Happy with that?
Tuesday, February 28, 2006
Legal & General Offer Good News
Legal & General Offer Good News
In a rarity for this site, I am again pleased to be able to write that a life assurance company is offering their long suffering endowment policy holders some good news.
Legal & General announced last week that their with profits fund experienced a 19% investment return during 2005. This meant that L&G could increase terminal bonuses for the majority of its 900,000 with-profits savers.
Additionally, L&G said that it had reduced the penalties policyholders had to pay if they cashed in their policy early.
The bonuses would vary from policy to policy, but people with a conventional endowment policy would receive 0.75% on their sum assured and 1.25% on bonuses they had previously been paid.
Someone with a 25-year low-cost mortgage endowment policy into which they have paid £50 a month will receive a final payout of £45,769, compared with £42,743 if the policy had matured a year earlier.
L&G claim that the strong investment returns seen during the year, were likely to reduce the number of people with endowment mortgage shortfalls.
In 2004, 55% of their policyholders were warned that their policy would not be large enough to repay their mortgage.
This "good" news from L&G, I would remind you that these policies were designed to pay off the mortgage, again calls into question the skills of some of the other life assurance companies who have announced cuts this year.
In a rarity for this site, I am again pleased to be able to write that a life assurance company is offering their long suffering endowment policy holders some good news.
Legal & General announced last week that their with profits fund experienced a 19% investment return during 2005. This meant that L&G could increase terminal bonuses for the majority of its 900,000 with-profits savers.
Additionally, L&G said that it had reduced the penalties policyholders had to pay if they cashed in their policy early.
The bonuses would vary from policy to policy, but people with a conventional endowment policy would receive 0.75% on their sum assured and 1.25% on bonuses they had previously been paid.
Someone with a 25-year low-cost mortgage endowment policy into which they have paid £50 a month will receive a final payout of £45,769, compared with £42,743 if the policy had matured a year earlier.
L&G claim that the strong investment returns seen during the year, were likely to reduce the number of people with endowment mortgage shortfalls.
In 2004, 55% of their policyholders were warned that their policy would not be large enough to repay their mortgage.
This "good" news from L&G, I would remind you that these policies were designed to pay off the mortgage, again calls into question the skills of some of the other life assurance companies who have announced cuts this year.
Wednesday, February 22, 2006
Good News From The Pru
Good News From The Pru
Those of you with endowment policies, managed by the Prudential, have something to celebrate.
They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.
The rise of 17%, after tax, has been passed on to their customers.
Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.
Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".
During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.
Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.
Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.
How many other endowments can claim that?
This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
Those of you with endowment policies, managed by the Prudential, have something to celebrate.
They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.
The rise of 17%, after tax, has been passed on to their customers.
Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.
Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".
During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.
Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.
Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.
How many other endowments can claim that?
This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
- Why have many of the others performed so badly?
- Why do they continue to blame the markets, when it is clear that it is the management of these funds that is to blame?
- Why do they continue to pay their senior staff bonuses, when their policies are failing their customers?
- Why do they make "management" charges on these failing and useless endowment policies, when they are clearly not capable of running them effectively?
Monday, February 06, 2006
Standard Life Fails To Deliver
Standard Life Fails To Deliver
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
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