Click HERE to see a copy of the FSCS Endowment 'factsheet' (current as at 1st December 2005)
The companies of The On-line Partnership Limited (trading as A P Financial Planning Services) and IFA Renewals Ltd have taken over the servicing of a number of Insurance Company agencies previously held by A.P.Financial Services Ltd. In doing so, they have not accepted any liability for advice which was previously given by A.P.Financial Services Ltd.
If your policy was sold by A.P.Financial Services Ltd it is that company which must deal with any complaint as it is the company which originally offered the advice which is responsible if the client subsequently believes the advice was inappropriate.
Be informed that A.P.Financial Services Ltd has ceased trading and is no longer authorised by the Financial Services Authority.
Therefore, if you wish to pursue a complaint about the sale and suitability of your endowment policy we would suggest that you make enquiries of the Financial Services Compensation Scheme.
We are sorry we cannot be of further assistance with regard to your complaint.
Many people believe that they have grounds for claiming compensation as they say they were not aware of the possibility of a shortfall and that they were unaware of the risks involved. As it may be of assistance in helping you decide on an appropriate course of action, we have set out below a generic overview of the situation regarding endowment-related complaints.
Whilst it is undoubtedly the case that your endowment policy premiums were calculated to repay the mortgage amount, (as your mortgage lender would have insisted on this) there should have been no doubt that this was conditional upon the endowment company performing at a particular rate of growth. Whilst at the time of the original sale, it may have been perfectly reasonable to expect that this rate of growth was achievable (and it may well have in fact been being achieved and exceeded - which is where the expectation of a surplus arises), you are undoubtedly aware that since that time, interest rates (and therefore the corresponding investment yield on your endowment) have steadily fallen. It is principally these falling interest rates which have lead to the possible shortfalls which are now being predicted. However, the corresponding interest payment which you pay to your lender as part of the overall mortgage package will also have been falling and therefore costing you less. We trust that you will forgive us for stating that it is somewhat unreasonable to recognise and enjoy the reducing cost of interest payments whilst expecting endowment investment returns to be maintained at the level which prevailed some years ago.
Most financial advisers will not automatically review a client’s needs unless asked to do so and are under no obligation to do so. Bearing in mind that financial advice is only valuable if it is updated regularly to reflect both the client’s circumstances and the prevailing economic conditions, many IFA clients maintain regular contact with their financial adviser. If you made no request, the progress of your endowment policies is unlikely to have been reviewed although you would of course have received statements from the insurance company annually. Furthermore, if you have remortgaged or moved house since the sale of the original endowment then its suitability should have been reviewed and re-assessed each time. If you have taken subsequent mortgage-related advice from a bank, building society or another adviser then the responsibility for dealing with your complaint would be a shared one or may well rest entirely with the latest company or individual to advise you if they did not review the suitability of the endowment policy.
In most cases, endowment policies which are now performing at a lower rate than initially expected still have many years to run to maturity. Although it looks unlikely in the near future, interest rates could rise again and this may very well have a positive effect on the insurance company bonuses so the current projected shortfalls may be less than feared. The purpose of the insurance companies issuing ‘warning’ letters is to draw your attention to the fact that you should take some positive action to address the potential shortfall – NOT to encourage spurious complaints.
One must also remember that there are 3 components to any endowment linked mortgage – the endowment policy itself, the interest payable to the lender and the property purchased. The changing investment and economic circumstances in the years since you took your original mortgage mean that the capital value of your property is significantly higher than it was at the time of purchase. As mentioned above, the cost of the monthly interest payable to the lender is significantly less. Although it may be convenient to do so, it is simply not equitable to ignore these two positive factors and focus only on the endowment policy performance. To do so is, at best, misguided and at worst, could be construed as disingenuous.
Many endowment compensation claimants state that they were “lead to believe that the policies would be at least sufficient to cover the amounts borrowed” or that “the policy would definitely pay off the mortgage”. As mentioned above, this may indeed have been a reasonable expectation at the time of the original advice, based upon the prevailing investment conditions. However, in our experience, the Financial Services Compensation Scheme are only likely to countenance any sort of claim from you if you can provide them with some evidence that you were given a guarantee that the policies would produce a certain figure on maturity. As you can imagine, they will not base a claim simply on a client’s unsubstantiated recollection of events as contractual arrangements such as these would be expected to be documented as indeed are all other aspects of the mortgage to which the endowment is attached.
Notwithstanding the expectations of compensation which have been generated by press coverage of the endowment shortfall issue, compensatory payments are not automatic and some evidence of mis-selling and your being an unwitting participant in a contract which you did not understand or was inappropriate at the time would have to be provided before you would have a legitimate claim.
Finally, we would strongly recommend that you read the ‘endowment complaints factsheet’ on the Financial Services Compensation Scheme website. The site address is www.fscs.org.uk One of the points previously made by the FSCS is:
“Whatever you were told, the key fact is whether the
product was suitable for you at the time you were advised to buy it”
- these are the words of the Regulator, not ours and we would respectfully suggest that you take this into account when deciding to approach the FSCS.
We have no particular ‘axe to grind’ for, as detailed at the beginning of this letter, the responsibility for dealing with any complaint lies with the company which gave the initial advice. However, were we to be tempted to express a personalised view from an IFA standpoint, we would have to say that it appears that a large number of people are now jumping onto the ‘compensatory bandwagon’ because investment returns have taken a turn for the worse. Whilst it is convenient to apportion blame to someone else, one must remember that the role of an adviser is to advise – it is the ultimate decision of the client to enter into the contract or not. Unless there is evidence of one being deliberately misled, there should be no realistic grounds for complaint. At some stage, mature, informed adults who willingly enter a contractual financial arrangement have to begin to at least share the responsibility for their actions. We have no wish to preach, but we are firmly of the opinion that the ‘blame/claim’ culture which is developing in this Country will ultimately be to the detriment of Society as a whole and that all of us will be adversely affected.
Whilst we are sure the above falls short of the response which you would have wanted, we hope that some of the information is of assistance. Presumably you will take all of the above into account when and if you make an approach to the Financial Services Compensation Scheme.
Click HERE to see a copy of the FSCS Endowment 'factsheet' (current as at 1st December 2005)