Cut old people's benefits, they'll die soon anyway
Discussion
sidicks said:
Derek Smith said:
My then fiancee and I took out an endowment policy, £4000 over 25 years, on the express understanding that it would assist in the purchase of a house some 18mnths down the line. The promise was there.
An endowment policy was an entirely reasonable method of funding the repayment of a mortgage.Derek Smith said:
We were told that building societies preferred them to mere savings deposits.
Well, if you had a deposit thhat could meet the cost of your mortgage you wouldn't need the mortgage in the first place...!!Derek Smith said:
When this was revealed as BS some five months in by someone else who'd been conned, we stopped payment.
So you believed them?!Derek Smith said:
I wanted my money returned but this was laughed at.
You'd had the life cover for the period, for a start.Derek Smith said:
We were told that, given that the salesman had lied - I had witnesses - what they would do was to 'freeze' the money and pay it back at the end of the term, some 25 years later. Or rather 24 years, 7 months. The total amount now owed me is laughable. No interest was to be paid on the sum. Come 1992 I took steps to retrieve the money owed to me but the original company had been taken over, amalgamated with another, and then bought out again. The current company denied all knowledge and then, when presented by documentary evidence, claimed that as it was not an ongoing policy - i.e. had been cancelled - they had not taken on the liability. So who had? In short, not our problem.
As you say, no route to get my money back. Fair enough, it's only a few £10s, but it is my few £10s.
I probably spent more money in phone calls than I was owed. Keep all documents and other records. It makes it easier for financial institutions to come up with an excuse to ignore you.
I was lied to.
I've got the feeling I was lied to 25 years after the original lie.
Seems like the Unions lied to you about your pension too...As you say, no route to get my money back. Fair enough, it's only a few £10s, but it is my few £10s.
I probably spent more money in phone calls than I was owed. Keep all documents and other records. It makes it easier for financial institutions to come up with an excuse to ignore you.
I was lied to.
I've got the feeling I was lied to 25 years after the original lie.
Edited by anonymous-user on Friday 9th October 09:31
I was lucky back in those times. I took out a highly recommended endowment in 1979. 5 years later we moved house. By then of course the bubble had burst and no one recommended them.
Like DS, I was offered next to nothing back on the premiums I had paid over those years, so maintained the payments for another 15 or so until it matured. By luck, and because of the prevailing tax relief on insurance policies back then, it wasn't overall a bad investment and wasn't needed in regard to our mortgage but, as we all know, many weren't so fortunate and paid through the nose for a crappy product. Even the compensation paid out years later failed to properly redress the situation.
Frankly, I have rarely met a financial advisor that knew much more then I do, even though they had lots of different ways of saying it, and I've never met one who had anything but there own interests at heart. Sad but true.
REALIST123 said:
I believe it's very well accepted that the efforts to sell people endowment mortgages back in the eighties was a huge scam?
No! Repayment mortgage means the bank takes the risk / return trade off, endowment mortgage means that the individual takes the risk-return trade-off.Of course dodgy advisors may not have fully explained the risks, focusing on the upside potential (appealing to 'greedy' customers)?!
Realist123 said:
Of course you could buy an endowment to pay off a mortgage but, at realistic rates of return it would be an expensive way to do it. It wouldn't make much more sense today.
At 'realistic rates of return' (whatever that means) it would have been cheaper than the repayment alternative - unfortunately, investment returns fell (as did inflation) significantly in the following decades.Realist123 said:
I was lucky back in those times. I took out a highly recommended endowment in 1979. 5 years later we moved house. By then of course the bubble had burst and no one recommended them.
Rubbish - endowment mortgages were common place into the 1990's.Realist123 said:
Like DS, I was offered next to nothing back on the premiums I had paid over those years, so maintained the payments for another 15 or so until it matured. By luck, and because of the prevailing tax relief on insurance policies back then, it wasn't overall a bad investment and wasn't needed in regard to our mortgage but, as we all know, many weren't so fortunate and paid through the nose for a crappy product.
As explained above, nothing wrong with the product, just the investment markets over the period!Realist123 said:
Even the compensation paid out years later failed to properly redress the situation.
Address the situation that returns are not guaranteed and to gain from the upside you face a risk on the downside?Realist123 said:
Frankly, I have rarely met a financial advisor that knew much more then I do, even though they had lots of different ways of saying it, and I've never met one who had anything but there own interests at heart. Sad but true.
People often fail to understand what an IFA is for - in general they are there to advise you on product availability and to find products to suit your needs, given your risk-return requirements.They cannot be expected to predict the future and guarantee the best investment return.
Additionally, most people don't want to pay for advice (or pay very little), so they shouldn't expect to get the services of a vastly experienced / qualified advisor!
That is the nature of the job.A advisor deals with your money if it doesn't work out it is not their money.I managed to sell our endowment at a loss but a lesson learned.I was lucky a retirement package paid my mortgage off.Agree about financial advisors the majority of advice you can work out yourself.
Foppo said:
That is the nature of the job.A advisor deals with your money if it doesn't work out it is not their money. I managed to sell our endowment at a loss but a lesson learned. I was lucky a retirement package paid my mortgage off.Agree about financial advisors the majority of advice you can work out yourself.
Why 'lesson learned'? Did you think that markets only ever go up?"The value of investments can go down as well as up and investments are not guaranteed...."
Etc
Andy Zarse said:
crankedup said:
I'm always interested in this type of question/remark, most of it is self explanatory to those within the industry or take a keen interest, but what I would like to understand is this :
who sets the targeted return and on what basis / investigatory assumptions.?
Critical yield presume this to be the avoidance of client bankruptcy of the fund?
Spectrum of asset classes! diversity of risk and sector I guess.
Asymmetrical market movements, another guess here movement of indexes comparable within differing sectors.
Putting aside the industry talk, as an investor all I want to know is where my investments are and why.
Expected growth on capital including dividends.
Extent of pro activity within the fund by fund manager(s).
Percentage of green / eco investment.
Essentially you have grasped the issues and constraints in which the industry and clients (whether corporate or individuals) have to work. who sets the targeted return and on what basis / investigatory assumptions.?
Critical yield presume this to be the avoidance of client bankruptcy of the fund?
Spectrum of asset classes! diversity of risk and sector I guess.
Asymmetrical market movements, another guess here movement of indexes comparable within differing sectors.
Putting aside the industry talk, as an investor all I want to know is where my investments are and why.
Expected growth on capital including dividends.
Extent of pro activity within the fund by fund manager(s).
Percentage of green / eco investment.
Thank you for giving an intelligent answer rather than the previous one of "you're just trying to baffle me with jargon"; I genuinely wasn't.
Having said this I still get miffed when I read of the wrongdoing within some sectors of the broader industry
We don't live in a perfect world and never will!crankedup said:
I have learnt that investing is no easy matter, whether that's from the client or Funding Manager's chair. Sure anybody can stuff cash under the mattress, if they are fortunate to have the cash, but to see a decent return is another matter entirely. I certainly do not profess to have any thing like a intrinsic knowledge of the business of investing therefore rely upon the professional, honest integrity of a hard working Investment House. Spreading risk with a broad range over several sectors within a few Investment Houses and trying to keep abreast of the broader issues is about my limit, this is why I pay the % earned by professionals to do the 'tricky stuff'.
That's good advice, and why I do the same!crankedup said:
Having said this I still get miffed when I read of the wrongdoing within some sectors of the broader industry
Me tooBut we need to understand and differentiate between poor advice (or worse, deliberately misleading advice) and just disappointing returns - which simply reflect the uncertain world we live in...
Talk of the wonder product Mortgage Endowment is a reminder of, what was for me, a tide of froth during the mid eighties. We were recovering and had a typical repayment mortgage, monthly payment that paid off some of the capital and interest on the loan. Mainly interest in the early years but as time went by the balance of payment between interest and capital swung over to more repaid on the capital and less on interest.
We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
We didn't fully understand the vagaries and risks that we were taking on. The sales pitch barely mentioned risk, only tiny small print at the bottom of the policy details did it mention that warranties were not offered nor implied or words to that effect.
We made it our business (not literally)to ensure that all future investment/loans we fully understood to the best of our knowledge from that experience on. Selling a financial product implicating tens of thousands of a clients pounds today is a far far more legislated affair today than back in the 'heady frothy' eighties, thankfully.
Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
We didn't fully understand the vagaries and risks that we were taking on. The sales pitch barely mentioned risk, only tiny small print at the bottom of the policy details did it mention that warranties were not offered nor implied or words to that effect.
We made it our business (not literally)to ensure that all future investment/loans we fully understood to the best of our knowledge from that experience on. Selling a financial product implicating tens of thousands of a clients pounds today is a far far more legislated affair today than back in the 'heady frothy' eighties, thankfully.
Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
sidicks said:
V8 Fettler said:
Many people who bought financial products to support mortgages in the 1980s and early 1990s have had no route to achieve a satisfactory solution:
An advisor's job is to explain the advantages and disadvantages of different products. They cannot be expected to predict the future - that is the biggest and most common misunderstanding - just because, with the benefit of hindsight, the endowment did not perform as well as might have been hoped, does not mean it was the wrong product or it was mis-sold.punter said:
Hello Mr Financial Adviser, please sell me a product suitable for repaying a mortgage. By the way, I have no financial expertise
Financial Adviser said:
Hello Mr Punter (who has no financial expertise), I shall use my professional expertise to recommend that you buy this endowment product, if it tanks ... tough
The only mis-selling that occurred was where advisors failed to explain the risks, given the requirements of the customer.
V8 Fettler said:
As I'm sure you recognise, the greatest financial advantage for many pensions is the tax break in and out, the core performance of many pension funds is dismal. If only I could engineer a tax break for the purchase of classic bikes.
This is the most often repeated nonsense in relation to pensions! A pension fund is just a wrapper - the performance is directly linked to the underlying investments chosen by the customer (advised, where appropriate). Most pension wrappers have an extensive range of investments that the customer can choose, depending on their risk-return preferences.This has been discussed numerous times in the Finance forum, and still people come up with the same nonsense!
Edited by sidicks on Friday 9th October 09:06
How many people genuinely choose the latter I wonder. Much easier to just go with the flow I suspect.
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crankedup said:
Talk of the wonder product Mortgage Endowment is a reminder of, what was for me, a tide of froth during the mid eighties. We were recovering and had a typical repayment mortgage, monthly payment that paid off some of the capital and interest on the loan. Mainly interest in the early years but as time went by the balance of payment between interest and capital swung over to more repaid on the capital and less on interest.
We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
I think this is in agreement with what I've said previously - the certainty of a repayment mortgage is exchanged for the upside potential of an endowment mortgage but was downside risk.We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
Whilst some people were mis-sold, plenty more chose to ignore the downside, attracted by the upside, only to cry foul when the upside didn't materialise due to no fault of anyone. It was not the product at fault.
crankedup said:
We didn't fully understand the vagaries and risks that we were taking on. The sales pitch barely mentioned risk, only tiny small print at the bottom of the policy details did it mention that warranties were not offered nor implied or words to that effect.
In general, people shouldn't sign things they don't understand or they should ask about the risks! There is no excuse for the advisor to misrepresent thise risks.crankedup said:
We made it our business (not literally)to ensure that all future investment/loans we fully understood to the best of our knowledge from that experience on. Selling a financial product implicating tens of thousands of a clients pounds today is a far far more legislated affair today than back in the 'heady frothy' eighties, thankfully.
Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
And yet some people would use the example of poor sales advice in the 1980s as reasons that entirely unrelated finance professional cannot be trusted 30 years later...Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
crankedup said:
Perhaps owing to the 'dryness' of financial planning and all that it entails will always glaze over the eyes of some people. By that I am not expressly suggesting anyone on this forum but within the general population. Sales brochures have been laden with statistics and jargon speak which had often been like reading a dictionary, thankfully regulation has been changing that approach for some years.
Agree to some extent, but it is inevitable that a product that is looking 10-25 years into the future will be somewhat more complex to explain given the uncertainties over that period.crankedup said:
Lets face it, the people come home after a days work, household duties + kids stuff in the evening. My guess is that many would simply enjoy collapsing in the sofa for a bit of 'me time' with a glass of wine! Or good oh! time to swat up on the investment portfolio and consider our pension arrangements.
How many people genuinely choose the latter I wonder. Much easier to just go with the flow I suspect.
?????????????
Agreed and I would never defend mis-selling. But these are important decisions that individuals should be considering properly and making sure they understand fully, rather than signing a form 'because they were told to' and using this as a get out clause when things don't work out quite as they'd hoped.How many people genuinely choose the latter I wonder. Much easier to just go with the flow I suspect.
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V8 Fettler said:
punter said:
Hello Mr Financial Adviser, please sell me a product suitable for repaying a mortgage. By the way, I have no financial expertise
Financial Adviser said:
Hello Mr Punter (who has no financial expertise), I shall use my professional expertise to recommend that you buy this endowment product, if it tanks ... tough
.The high point for lcem sales where the 1980. They where being sold with interest rates and inflation 10%. This gave investment returns of 15% so a lcem would reduce the monthly payments substantially. In such condition an endowment mortgage made perfect sense. Which (the magazine of the consumer association) even recommended them. Those who had taken them out 25 years ago where seeing policies mature and not just pay off the mortgage but leave a windfall profit.
What no one expected was the Thatcher/Lawson economic policies where forcing inflation out of the UK economy. As a result UK interest rates fell sharply and therefore the return on the lcem. However, as interest rates fell the price of houses rose.
Those of us who make sure we keep up to date with our finances (every year you would get a statement on your endowment and it took 2 minutes to realised the endowment would no longer pay the capital on our mortgage) switched to payment mortgages.
As the lcem sold in the 1980 started to get close to maturity the CA (having forgotten it had previously recommended the products) started shouting about miss selling. The regulators looked a a problem and decided to blame the financial sector, for 20 years ago not realising that UK inflation was about to fall.
So everybody who had ignored the problem got compensation. They also got to keep a house which value had increased because of falling interest rates. A win/win.
Those of us who had realised there was a problem got nothing. Indeed, as shareholders in the financial sector we had to pay for the compensation.
So it difficult not to argue lcem where a great investment for the stupid.
sidicks said:
crankedup said:
Talk of the wonder product Mortgage Endowment is a reminder of, what was for me, a tide of froth during the mid eighties. We were recovering and had a typical repayment mortgage, monthly payment that paid off some of the capital and interest on the loan. Mainly interest in the early years but as time went by the balance of payment between interest and capital swung over to more repaid on the capital and less on interest.
We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
I think this is in agreement with what I've said previously - the certainty of a repayment mortgage is exchanged for the upside potential of an endowment mortgage but was downside risk.We then received a letter in the post from our Building Society, it basically laid out the benefits of changing our repayment mortgage over to a Endowment Mortgage. The numbers looked good and the 'lump sum' at the end of the endowment period particularly luring! We asked for more detail and were offered a choice of one from three Companies offering endowment mortgages. We went for it, but fortunately kept with the old adage 'don't put all your eggs in one basket'. We went for a 50/50 split endowment /repayment.
We never did get a lump sum but considered that we were fortunate in building up enough within the endowment to pay off the capital sum owed at the end of the endowment period.
The whole scenario proved to be stressful and very risky, a far cry from the sales pitch of the endowment policy.
Whilst some people were mis-sold, plenty more chose to ignore the downside, attracted by the upside, only to cry foul when the upside didn't materialise due to no fault of anyone. It was not the product at fault.
crankedup said:
We didn't fully understand the vagaries and risks that we were taking on. The sales pitch barely mentioned risk, only tiny small print at the bottom of the policy details did it mention that warranties were not offered nor implied or words to that effect.
In general, people shouldn't sign things they don't understand or they should ask about the risks! There is no excuse for the advisor to misrepresent thise risks.crankedup said:
We made it our business (not literally)to ensure that all future investment/loans we fully understood to the best of our knowledge from that experience on. Selling a financial product implicating tens of thousands of a clients pounds today is a far far more legislated affair today than back in the 'heady frothy' eighties, thankfully.
Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
And yet some people would use the example of poor sales advice in the 1980s as reasons that entirely unrelated finance professional cannot be trusted 30 years later...Nothing new or startling here, simply a snapshot of another posters element of financial (in)experience.
I think if you can encapsulate the scandal it is that few people seemed to understand running an endowment mortgage was similar to running a one man final salary pension scheme; there was a notional liability to be monitored, a funding projection to be managed using sensible assumptions and investment returns and other external factors to be monitored over a period of time. That anyone could think signing an application form and that was that for the next twenty five years strikes me as utterly insane.
Edited by Andy Zarse on Friday 9th October 12:03
Andy Zarse said:
I think if you can encapsulate the scandal it is that few people seemed to understand running an endowment mortgage was similar to running a one man final salary pension scheme; there was a notional liability to be monitored, a funding projection to be managed using sensible assumptions and investment returns and other external factors to be monitored over a period of time. That anyone could think signing an application form and that was that for the next twenty five years strikes me as utterly insane.
Very good point - I don't think (from personal memory) that it was ever really highlighted by salesmen that this was an active investment, rather than a simple - "sign up for the term, get some money back at the end, returns may vary" kind of deal. Edited by Andy Zarse on Friday 9th October 12:03
edh said:
Andy Zarse said:
I think if you can encapsulate the scandal it is that few people seemed to understand running an endowment mortgage was similar to running a one man final salary pension scheme; there was a notional liability to be monitored, a funding projection to be managed using sensible assumptions and investment returns and other external factors to be monitored over a period of time. That anyone could think signing an application form and that was that for the next twenty five years strikes me as utterly insane.
Very good point - I don't think (from personal memory) that it was ever really highlighted by salesmen that this was an active investment, rather than a simple - "sign up for the term, get some money back at the end, returns may vary" kind of deal. Edited by Andy Zarse on Friday 9th October 12:03
As I mentioned we got out at the end of the term with enough to pay off the capital debt. Looking back we trusted our B.S. and had been brought up to trust such businesses!! Life Assurance Companies and the like. Truth is these Companies could coast along and we were more concerned with here and now + two kids and business worries. How times change.
sidicks said:
V8 Fettler said:
Many people who bought financial products to support mortgages in the 1980s and early 1990s have had no route to achieve a satisfactory solution:
An advisor's job is to explain the advantages and disadvantages of different products. They cannot be expected to predict the future - that is the biggest and most common misunderstanding - just because, with the benefit of hindsight, the endowment did not perform as well as might have been hoped, does not mean it was the wrong product or it was mis-sold.punter said:
Hello Mr Financial Adviser, please sell me a product suitable for repaying a mortgage. By the way, I have no financial expertise
Financial Adviser said:
Hello Mr Punter (who has no financial expertise), I shall use my professional expertise to recommend that you buy this endowment product, if it tanks ... tough
The only mis-selling that occurred was where advisors failed to explain the risks, given the requirements of the customer.
V8 Fettler said:
As I'm sure you recognise, the greatest financial advantage for many pensions is the tax break in and out, the core performance of many pension funds is dismal. If only I could engineer a tax break for the purchase of classic bikes.
This is the most often repeated nonsense in relation to pensions! A pension fund is just a wrapper - the performance is directly linked to the underlying investments chosen by the customer (advised, where appropriate). Most pension wrappers have an extensive range of investments that the customer can choose, depending on their risk-return preferences.This has been discussed numerous times in the Finance forum, and still people come up with the same nonsense!
Edited by sidicks on Friday 9th October 09:06
Financial advisers take fees for using their expertise to make a professional assessment of the suitability of a product. If it transpires that the product is unsuitable then the costs for remedy should be carried by the professional because that's what he's paid to do.
Assessing future performance is something that designers (i.e. advisers) outside of the financial sector take responsibility for e.g. the future performance of an electrical supply network. For that they receive a fee, they don't always get it right but they generally take responsibility when their assessments are flawed.
Wasn't the use of the phrase "if only I could" a clue?
Nonsense you say? The real nonsense is in trusting financial advisers.
Derek Smith said:
V8 Fettler said:
Many people who bought financial products to support mortgages in the 1980s and early 1990s have had no route to achieve a satisfactory solution:
My then fiancee and I took out an endowment policy, £4000 over 25 years, on the express understanding that it would assist in the purchase of a house some 18mnths down the line. The promise was there. We were told that building societies preferred them to mere savings deposits. When this was revealed as BS some five months in by someone else who'd been conned, we stopped payment. I wanted my money returned but this was laughed at. We were told that, given that the salesman had lied - I had witnesses - what they would do was to 'freeze' the money and pay it back at the end of the term, some 25 years later. Or rather 24 years, 7 months. The total amount now owed me is laughable. No interest was to be paid on the sum. Come 1992 I took steps to retrieve the money owed to me but the original company had been taken over, amalgamated with another, and then bought out again. The current company denied all knowledge and then, when presented by documentary evidence, claimed that as it was not an ongoing policy - i.e. had been cancelled - they had not taken on the liability. So who had? In short, not our problem.As you say, no route to get my money back. Fair enough, it's only a few £10s, but it is my few £10s.
I probably spent more money in phone calls than I was owed. Keep all documents and other records. It makes it easier for financial institutions to come up with an excuse to ignore you.
I was lied to.
I've got the feeling I was lied to 25 years after the original lie.
Mrr T said:
V8 Fettler said:
punter said:
Hello Mr Financial Adviser, please sell me a product suitable for repaying a mortgage. By the way, I have no financial expertise
Financial Adviser said:
Hello Mr Punter (who has no financial expertise), I shall use my professional expertise to recommend that you buy this endowment product, if it tanks ... tough
.The high point for lcem sales where the 1980. They where being sold with interest rates and inflation 10%. This gave investment returns of 15% so a lcem would reduce the monthly payments substantially. In such condition an endowment mortgage made perfect sense. Which (the magazine of the consumer association) even recommended them. Those who had taken them out 25 years ago where seeing policies mature and not just pay off the mortgage but leave a windfall profit.
What no one expected was the Thatcher/Lawson economic policies where forcing inflation out of the UK economy. As a result UK interest rates fell sharply and therefore the return on the lcem. However, as interest rates fell the price of houses rose.
Those of us who make sure we keep up to date with our finances (every year you would get a statement on your endowment and it took 2 minutes to realised the endowment would no longer pay the capital on our mortgage) switched to payment mortgages.
As the lcem sold in the 1980 started to get close to maturity the CA (having forgotten it had previously recommended the products) started shouting about miss selling. The regulators looked a a problem and decided to blame the financial sector, for 20 years ago not realising that UK inflation was about to fall.
So everybody who had ignored the problem got compensation. They also got to keep a house which value had increased because of falling interest rates. A win/win.
Those of us who had realised there was a problem got nothing. Indeed, as shareholders in the financial sector we had to pay for the compensation.
So it difficult not to argue lcem where a great investment for the stupid.
There is a general view within the financial sector that it's perfectly satisfactory for a professional adviser (who should hold expertise) to provide professional advice leading to the recommendation of a product and extract a fee for that professional recommendation, and yet if the product is flawed then this becomes a problem for the customer (who generally has minimal expertise), not the professional financial adviser.
The above directly contradicts the position in the real world outside of the financial sector where a professional adviser (who extracts a fee for his professional advice) would generally take responsibility for the risk and costs associated with flawed professional advice.
If a professional adviser cannot take professional responsibility for assessing future performance then they should look for an alternative career.
For tax breaks alone, most wage earners in the UK should be falling over themselves to take professional financial advice, and yet this doesn't occur. Trust being the biggest issue.
V8 Fettler said:
The primary responsibility of the financial adviser should be to recommend products that are suitable for the punter. If the FA recommends a product that is unsuitable for repaying a mortgage then the risks and costs associated with that poor advice should sit with the financial adviser, because he is the expert and he receives a fee.
An endowment is an entirely appropriate product for repaying a mortgage, providing the risks are well understood.V8 Fettler said:
Financial advisers take fees for using their expertise to make a professional assessment of the suitability of a product. If it transpires that the product is unsuitable then the costs for remedy should be carried by the professional because that's what he's paid to do.
In most cases, the product wasn't unsuitable.V8 Fettler said:
Assessing future performance is something that designers (i.e. advisers) outside of the financial sector take responsibility for e.g. the future performance of an electrical supply network.
Ridiculous analogy.Advisers cannot control the future performance of investment markets.
V8 Fettler said:
Nonsense you say? The real nonsense is in trusting financial advisers.
The nonsense is in not understanding what financial advisers can (and most importantly cannot) do!Edited by sidicks on Saturday 10th October 08:29
V8 Fettler said:
You have no knowledge of my personal finances or my personal financial ability, so your comment is clearly a work of fiction. As an aside, personal investment decisions I've made without the benefit of financial adviser have far outperformed those made with the advice of a professional financial adviser. Make of that what you will.
There is a general view within the financial sector that it's perfectly satisfactory for a professional adviser (who should hold expertise) to provide professional advice leading to the recommendation of a product and extract a fee for that professional recommendation, and yet if the product is flawed then this becomes a problem for the customer (who generally has minimal expertise), not the professional financial adviser.
If the advice is 'flawed' then yes, the adviser is liable. Not being able to predict the future paths of investment markets is NOT flawed advice.There is a general view within the financial sector that it's perfectly satisfactory for a professional adviser (who should hold expertise) to provide professional advice leading to the recommendation of a product and extract a fee for that professional recommendation, and yet if the product is flawed then this becomes a problem for the customer (who generally has minimal expertise), not the professional financial adviser.
V8 Fettler said:
The above directly contradicts the position in the real world outside of the financial sector where a professional adviser (who extracts a fee for his professional advice) would generally take responsibility for the risk and costs associated with flawed professional advice.
Again, you demonstrate your lack of understanding of what an investment adviser can realistically do - predicting the future is not one of those things. Hence the concept of a risk & return trade-off.V8 Fettler said:
If a professional adviser cannot take professional responsibility for assessing future performance then they should look for an alternative career.
For tax breaks alone, most wage earners in the UK should be falling over themselves to take professional financial advice, and yet this doesn't occur. Trust being the biggest issue.
Or, as demonstrated in this thread, the biggest issue is the lack of understanding about what an advisor is for (and possessing a crystal ball isn't one of those things)...!For tax breaks alone, most wage earners in the UK should be falling over themselves to take professional financial advice, and yet this doesn't occur. Trust being the biggest issue.
Edited by sidicks on Saturday 10th October 08:35
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