Discussion about mis-selling of endowment mortgages in the 80s and 90s

[Colonel_Klinck]

A person who is an independent financial advisor offers you what is supposed to be the best product. In fact, all the independent financial advisors are recommending the same product.

There is no internet for you to research these things. You speak to this IFA because he's independent and you can trust him. You speak to a few other advisors, they're all suggesting the same product.

When it turns out that he's not trustworthy and sells you what's best for him and worst for you, there's only really one person to blame. That's why it's called mis-selling. I don't know how old you are but things are very different now to how they were in the 80s and 90s.

I think there are a few posters who have never known a world without the internet. They just can't put themselves in that world.

 

[Em3bbs]

In my experience it was a world where people generally took a lot more personal responsibility, actually read the small print and didn't complain for whippy compo when they screwed up.

 

[dlockers]

I think there are a few posters who have never known a world without the internet. They just can't put themselves in that world.

It's almost as if those who didn't have internet have never known a world without internet. It's like before internet it was impossible to make an informed decision?

 

[Mercenary Keyboard Warrior]

It's almost as if those who didn't have internet have never known a world without internet. It's like before internet it was impossible to make an informed decision?

To be fair, it was harder for many to get access to information in order to be able to make an more informed decision, or access all deals.
You still hear people who think Brokers have loads of special rates available on mortgages for your average punter on the street, when in reality your often better off going direct.
Self employed, complicated situation, yes Broker, but for average punter they can't offer anything special.

Eg annual car insurance ring around. had to put aside half a day to ring all the brokers and a few direct numbers in order to secure best deal.
Many would just accept renewal quote from their Broker as it "wasn't worth ringing around". Many would be the same people who carried that on when price comparison websites came into existence.
The same people we we are told had to be protected from the evil insurance companies who applied the standard rate to those not willing to shop around.

 

[Colonel_Klinck]

It's almost as if those who didn't have internet have never known a world without internet. It's like before internet it was impossible to make an informed decision?

This world and that are very different. People trusted institutions like their banks back then, they thought they had their best interests at heart. Now we know that isn't the case. Partly because the institutions changed around the 80s and then we became better informed by the internet. Before the internet you either asked experts, who in this case were lying or you went to the library and tried to learn it yourself.

 

[Haggisman]

In my experience it was a world where people generally took a lot more personal responsibility, actually read the small print and didn't complain for whippy compo when they screwed up.

Based on the fact these financial institutions have lost compensation cases because they weren't able to provide sufficient documentation, it wouldn't surprise me if the small print didn't necessarily contain all of the pertinent details!

It's almost as if those who didn't have internet have never known a world without internet. It's like before internet it was impossible to make an informed decision?

An informed decision is only as good as the information it is based on.

Before the internet you were limited to:

Libraries (not necessarily the most up to date)
Industry journals/magazines (assuming you can get access to them, and hopefully they have an article on the subject you need to be informed about at the right time)
Being lucky enough to have a friend/family member in the industry who was able to offer genuine advice without the bias of trying to make money from you
"Independent" experts - well, this thread shows how well that turned out

 

[dlockers]

Before the internet you were limited to:

Libraries (not necessarily the most up to date)
Industry journals/magazines (assuming you can get access to them, and hopefully they have an article on the subject you need to be informed about at the right time)
Being lucky enough to have a friend/family member in the industry who was able to offer genuine advice without the bias of trying to make money from you
"Independent" experts - well, this thread shows how well that turned out

Yet somehow outside of the "victims" of endowments we manage to get to the moon

 

[200sols]

Libraries (not necessarily the most up to date)
Industry journals/magazines (assuming you can get access to them, and hopefully they have an article on the subject you need to be informed about at the right time)
Being lucky enough to have a friend/family member in the industry who was able to offer genuine advice without the bias of trying to make money from you
"Independent" experts - well, this thread shows how well that turned out

Did the paperwork not explain the risks involved?

 

[ColdAsIce]

Drummed into me and my brother as a kid. If it's to good to be true....

Yet, no-one wondered why there wasn't a single down side to these policies :O

 

[peterwalkley]

What some people seem to be not understanding here is that we were ACTIVELY LIED TO to by professionals with a personal stake in selling these products. The downsides and risks were downplayed and waved away by the industry in pursuit of those juicy commissions. That's why it was a scandal, fines and restitutions imposed and regulations introduced.

Hindsight is awesome ... but unless you were there, your opinion holds little weight for me.

 

[ProStreet]

It's pretty similar for me.. the worst mistake I made was buying a leasehold flat, only six months ago I managed to sell it. Any leasehold that has less than 125yrs left on the term can be classified as an AST, the same contract you enter into when you rent. Ie if you fail to pay the ground rent once they can take you to court and make you forfeit the property. This wasnt communicated when i bought it. Obviously I paid the ground rent on time but you don't have much protection with leasehold as you think you do.

Pure freehold is the only way

 

[Em3bbs]

It sounds more like "Unless you too didn't bother correctly researching a major financial decision, your opinion holds little weight for me." rather than "Unless you were there.".

 

[Hagar]

What some people seem to be not understanding here is that we were ACTIVELY LIED TO to by professionals with a personal stake in selling these products. The downsides and risks were downplayed and waved away by the industry in pursuit of those juicy commissions. That's why it was a scandal, fines and restitutions imposed and regulations introduced.

Hindsight is awesome ... but unless you were there, your opinion holds little weight for me.

Agreed, there was a salutary lesson learned by us though and that was get a mortgage that pays off the principal.

We had to agree and sign that we were NOT taking their best advice at the third mortgage interview we attended however 21 years after starting our first mortgage we were free of it all.

 

[wesimmo]

Agreed, there was a salutary lesson learned by us though and that was get a mortgage that pays off the principal.

We had to agree and sign that we were NOT taking their best advice at the third mortgage interview we attended however 21 years after starting our first mortgage we were free of it all.

It was fairly common to have to get a customer to sign that they weren't taking the advice given for a lot of products.

Basically, after a financial review, you recommended products such that protection of income was first, so life and critical illness cover, then pension provision and only then could you recommend any savings or investment products.

Most people would reject the critical illness cover and a lot of people would reject the life cover advice, and you weren't encouraged to really push back on that if you sold something else.

The market i was working, which was the old model of a rep going round weekly and collecting premiums in cash, often only a few quid a week, and signing their payment book was probably the demographic that was hit by the mis-selling. More often than not they were buying small endowments over 5/10 years anyway.

A lot of these people were barely literate, never mind financially so, and trusted the word of their 'insurance man'.

TBH I never made it in the industry, I was a crap seller anyway even within the limits of legality and morality, but also I couldn't ever resort to some of the tactics some people used to get business signed up.

 

[Feek]

It sounds more like "Unless you too didn't bother correctly researching a major financial decision, your opinion holds little weight for me." rather than "Unless you were there.".

How far were we supposed to go? When Mrs. Feek and I were looking for a mortgage, we spoke to five different independent financial advisors who all told us that the endowment was the way to go. Where do you draw the limit, five advisors, ten advisors? Based on our conversations with these, we considered we correctly researched a major financial decision because they all told us the same thing.

It was a little wild West, although as ever with financial products the majority of the population never understood. I had a friend who was selling them and he had to produce a low, mid and high investment return.
It was always the same in his words and what I saw.
1) People would ignore the low after being told it was based on returns below what the market had performed in recent times. So 1 mentally dismissed.
2) People would base their outgoings on the average
3) People would get the extra from the higher into their heads and expect something like a car worth of extra at the end.

We weren't given low, average and high figures. We were told that at the end of the product lifespan, we would have xx thousand pounds to pay off the mortgage and 'a large lump sum'. All the advisors told us this, there was no real discrepancy between them apart from a few quid difference on the monthly figures.

I'm sure that @SexyGreyFox will concur with this, as will others in here.

This is how it was, this is why it was such a scandal when it finally imploded on itself.

Everyone belittling us for 'not doing our research' does not understand what actually happened then. We did the best research that was possible at the time.

What some people seem to be not understanding here is that we were ACTIVELY LIED TO to by professionals with a personal stake in selling these products. The downsides and risks were downplayed and waved away by the industry in pursuit of those juicy commissions. That's why it was a scandal, fines and restitutions imposed and regulations introduced.

Exactly. When multiple IFAs tell you you the same lies, you do believe them.

 

[dod]

Exactly. When multiple IFAs tell you you the same lies, you do believe them.

especially if it was "The man from the Pru"

 

[Mercenary Keyboard Warrior]

Did the paperwork not explain the risks involved?

Yes but it would certainly not meet modern standards.
E.g. it always had the investments may go down as well as up spiel, although I think that was improved on specifically after this issue.

 

[Mercenary Keyboard Warrior]

How far were we supposed to go? When Mrs. Feek and I were looking for a mortgage, we spoke to five different independent financial advisors who all told us that the endowment was the way to go. Where do you draw the limit, five advisors, ten advisors? Based on our conversations with these, we considered we correctly researched a major financial decision because they all told us the same thing.


We weren't given low, average and high figures. We were told that at the end of the product lifespan, we would have xx thousand pounds to pay off the mortgage and 'a large lump sum'. All the advisors told us this, there was no real discrepancy between them apart from a few quid difference on the monthly figures.

I'm sure that @SexyGreyFox will concur with this, as will others in here.

This is how it was, this is why it was such a scandal when it finally imploded on itself.

Everyone belittling us for 'not doing our research' does not understand what actually happened then. We did the best research that was possible at the time.

Exactly. When multiple IFAs tell you you the same lies, you do believe them.

The thing is, and no offence, if it was that simple did you not ask yourself, why are they saying I need to save £x to pay off my mortgage at the end and have a big chunk left over, why are they not saying pay £y which will be the right amount to pay off my mortgage.
This is why I say that most people are not sophisticated enough financially to make the choice.
I know people who stuck with the endowments, they added some additional investing themselves and paid up at the end. They vary but some claim it was still cheaper then a repayment had of been and others that it was slightly the other way.
These are people capable of making the correct statement and correctly evaluating the real costs. Again, most consumers are not sophisticated enough to do that.

I have had so many conversations with people in 35 years of working in finance where they swear that X is a thing and they will prove it only to find they were wrong when they read the actual document.
Its like when people say he didn't ask me my appetite for risk, I was mis-sold! When a good IFA will ask them other questions and get the information that way.

As I said, there was no real issue with endowments really, but as a product that would provide variable returns they built in some slack (your cheque at the end) to try to cover expected returns.
Problem is they got it wrong, they all got it wrong, and if one advisor had said, you need to pay in 3x more than you did you wouldn't have gone with them, so they all based on recent history. Which was fine, until it wasn't.
Sounds a bit like everyone who said super low interest rates were here to stay and no way they could ever go to 5% again

Most people I know who had the biggest issues were the ones who went head in the sand.
The next worst were the ones who cancelled investments where they had paid lots of fees and didn't let them go to term.
Most of the problem was people who didn't want to accept the news, that their policy was going to fall short and they needed to up the investment side. Compounding means they needed to act fast and decisively but many did the opposite, I will hold out, maybe it will come good. No chance in reality by that point.
By that point their big cheque and paid off mortgage wasn't "what they were promised", and was never going to happen.

 

[DXP55]

Bloke at work took out a endowment mortgage but realised when stock markets went a bit ropey it wouldn't cover it so changed to a normal mortgage.

Unfortunately the FIL wasn't so bright when he used one to buy his council house - There was just enough to pay it off and all that big lump he was expecting didn't appear - he wasn't happy and neither was MIL - If it wasn't for MIL he would have bought it years earlier when it was about £8k not £50k.

I was told when looking for our first house do not buy one with a lease only freehold. Worked for us.

​

 

[dlockers]

Everyone belittling us for 'not doing our research' does not understand what actually happened then. We did the best research that was possible at the time.

You say that - but it wasn't just "at the time". It was for the 20 years the thing ran for.