Finally, one of my old investments came on line so that I can go in and check it at will. It was an endowment policy that I took out back in 1992 because, frankly, I didn’t know any better in those days.
Years later, when the scandal of mortgage mis-selling reached a peak, I discovered that the first full year of payments that I’d made into this endowment policy went straight to the agent who’d sold me it. I didn’t remember him mentioning that when he sold me the policy. I made a claim against this for compensation, but it was judged that not pointing out this fact in plain English wasn’t seen as illegal or dodgy practice and my claim was turned down. The agent could show that he’d done everything else right in terms of the sale, and I suppose he had. But he took the first £1,500 of my payments which, 25 years later at maybe a 5% return….oh, it’s too painful to work out!
As I clicked through to the website to have a look at my investment, however, I suddenly find nothing’s changed. So far, this year to date, I’ve been charged over £700 in fees for the “management” of this policy. Suddenly, the screen before me went red. Then I realised it wasn’t the screen, it was a red mist of rage descending on my brain. Frankly, if they’d charged me a tenth of that for their “management”, I’d still have questioned it. Fifteen minutes later I was on the ‘phone to them trying to discover if I cashed the policy right now, today, were there any charges, bonus forfeits or anything else that I needed to be aware of before I did so? The answer was “no”, so I asked for that in writing. Preferably in their blood. And then I cashed it, well aware that charges of one sort or another on this policy over twenty five years had cost me in excess of twenty grand.
Isn’t that scandalous? It makes me feel almost physically ill. I mean, what are they doing for this money? I even originally chose the damn funds that the investments was being split into so they didn’t even have an input into that. Not that they were probably allowed to. I can still remember as clear as day how the agent (I’m not sure if they were called IFAs in those days) “advised” me on picking funds for the endowment. He basically held open a magazine and started flicking through pages that listed literally hundreds of fund options. He’d highlighted a few of these with a yellow marker as some that he, personally, found of interest but, of course, the choice of where to put my money was absolutely mine. What did I think? Again, he personally would choose maybe three or four to split my monthly payments equally into, but the decision of how many was up to me. Sitting there, in his office, I was at a total loss – this was all beyond me, but I was far too proud to admit that to him, or my young wife sitting next to me. I picked three with absolutely no idea what I was doing, but hoped that I looked as if it did.
Actually the funds I picked were none too bad, but I had no idea of the charges they’d accrue. I still don’t. In a way, I don’t want to know the detail because I can’t turn the clock back and change anything now. I’ve lost twenty grand. I’m on the verge of tears writing it down.
At this point, I have to grudgingly admit that this firm were – now – making very clear what I was being charged on my investments. I can’t say this about the other financial providers I hold funds with. Why can’t I, very simply, go into a website , click on that “Global Special Situations” fund and see what I’ve been charged on it this year to date? And I mean all the charges, every last one, shown as a total figure? With a percentage next to it that I can then compare to similar funds?
And, you know, maybe I can do that. But if that’s so, then it’s not simple – either to do, or to understand. And I’m bloody interested in this stuff! What chance have other people who are “trusting” that their grandly named fund management company will be giving them a quality service for a fair price?
They say that the margin in the fund management industry is over forty percent. They’re probably creatively accounting like mad to make it that low. I look at the City, the salaries and the bonus payments, the cosy self-congratulation about just how great they all are and it makes my blood boil. I’m paying for that, and so are you. Supposedly there’s change in the air with so much money now going to Index funds and government reports into excessive profits. Vanguard have also launched into the the UK with their lower cost model, and praise be to them. But until we get real transparency on fees, real healthy competition and a government more interested in consumers than a non-exec future seat on a City firms’ Board, change will continue at a glacial pace. After all, it’s been this way for a long time, and the customer’s yachts are still missing from the harbour.
sex health money death 
Well said.
Though I can see why your firm has taken so long to put this stuff online!
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Me too. Maybe it was online but, as I was sold their policy through an agent, they missed the communication to me? Another reason not to use one!
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I have had similar experiences with opaque charges, not least when I received zero advice and did all the work myself. It is an absolute scandal, and yet I don’t see anyone being held responsible for this. Like you, it makes my blood boil. The one good thing that came out of this for me was that I vowed never to be duped again by these companies, and don’t go near a so-called Financial Adviser now.
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As I near my pension-taking age, I fret about getting professional advice. In all the years I’ve been posting on financial blogs, very few people advise that I should. But I worry that there’s something out there about tax or otherwise that I’m missing!
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They don’t make life easy for us investors to compare and analyse what they charge us, and most of us end up giving up trying to work it out as its too much work. I’m guilty of that as well (as an investor, not fund manager!)
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It’s ridiculous. When you buy almost anything else you have a rough idea of what it will cost. If this company said at the outset “You do realise that if your fund grows to 100k we will be deducting 20k in charges over those years” I’d have run a mile, along with everyone else. I still can’t quite believe that this what this has cost me.
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I got into one of those too not so long ago, similar scenario as you (didn’t know anything about finances but felt I had to pretend). Ended up cutting my losses, and writing a brutally honest review about that company. What happened to me afterwards was documented by MMM in one of his articles. I’m actually so afraid of them coming back at me again that I won’t link to the article, but you can probably find it by googling “mrmoneymustache lawsuit”
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Hi Stockbeard, I’d read that article and it’s why I didn’t name the company in question here. So glad we live in free countries, until it comes to money.
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Thanks for the cautionary tale, even if it made me woozy from anger.
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Just spent a while following the trail round the internet – no idea who is who on the other forums, but is one of the problem firms employing an ex pensions minister?
It’s a total scandal. Have you thought about writing to the FCA? I know cynicism abounds about their gutlessness, but worth starting somewhere surely. It seems completely wrong that people are effectively being silenced from naming and shaming – that’s partly how they get away with it.
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In 1996 i was opted out of SERPS due to my workplace pension and got a form through the post where i could pick funds to send the NI rebate to. I had the choice to select various funds or the default with profits option – which i selected.
I cant say anyone mis sold me anything as such, or perhaps they did, but after 20 years the contributions had increased by around 20%. I finally noticed and wrote asking if i could transfer without penalty. They said yes – presumably because they had screwed every penny from the pot already. I never saw any commentary on fees – but after inflation i reckon i made nothing.
Since i moved that very small pot to a cheap tracker it has made more in a year than in 20 years. Its nothing short of a disgrace. I dont want to work out what i should have received…..
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Me too. Me too. Also, same happens with small pensions:- get the transfer value, projected value at retirement and if the latter is anything other than a lot more at retirement (mine was actually LESS due to charges) then Transfer Out to your SIPP. Grrrr.
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Wait ’til they get rid of all those pesky regulations currently holding back our economy from scoring the dizzy heights of voodoo finance. Then you wont even need the show of an alleged watchdog intervening before you find out you were royally ******; we could call it the new slash & burn/winner-takes-all economy. It’s not corruption though, that’s for tinpot regimes, this is fully legal, so it must be civilised.
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About 20 years ago, my ex-brother-in-law (who was a mortgage broker) arranged for an income protection policy for me. The premium was about £20/month. He mistakenly showed me the final paperwork on this policy revealing that his fee was £744!! I still choke on my cornflakes thinking about how unbelievable that fee was for 10 mins work. (The irony is that he eventually went bankrupt by living way beyond his means).
Plus I’ve also been stung by endowment mortgages (not once, but twice) so I am absolutely with you on this one, Jim. As mentioned in a previous post, my one-year flirt with an IFA is almost certainly going to be coming to an end in December.
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I still really can’t get over this and am thinking about writing to the provider (now that I have the cash in my bank) asking for a breakdown of what I have been charged on this policy over the years. Surely I’m within my rights to be told? Then, depending on what happens, it’s the Financial Ombudsman!
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Go for it. At least put it on the radar.
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A mortgage adviser tried hard to sell me an endowment mortgage in 1994 but I insisted on repayment style. My reasoning was that if the expected endowment gains were as high and as certain as to be worth having the lender would have invested in them directly without cutting me in. I knew a lot less then but I thought that was common sense.
A small advantage of endowments came from MIRAS tax relief as your amount borrowed remained higher than with a repayment.
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