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Last Updated: Friday, 16 April, 2004, 05:24 GMT 06:24 UK
Ask the expert: Endowment redress
David Cresswell
This week's expert: the Financial Ombudsman's David Cresswell

BBC News Online's Ask the Expert column gives readers a chance to have their financial questions answered.

This week, David Cresswell, head of communications at the Financial Ombudsman Service, helps Your Money reader Mark Bullivant.

Mr Bullivant says he has spent months trying to pursue a claim for compensation over an endowment mortgage he purchased in 1985.

He believes he was mis-sold his policy, which is now also facing a shortfall of up to 6,000.

The bad news for Mr Bullivant is that his policy was bought through an independent financial adviser (IFA) before their sales were regulated.

Is there any chance of redress?

David Cresswell writes:

Unfortunately, Mr Bullivant took out his policy before the legislation came into effect that required anyone giving financial advice to be authorised to do so.

The date of this legislation - the Financial Services Act - was 29 April 1988.


The independent service that resolves disputes between consumers and financial firms - the Financial Ombudsman Service - can generally only look at complaints if the event complained about took place after 29 April 1988.

It can sometimes look at complaints about events that took place before that date, but only if the firm involved formerly belonged to one of the voluntary ombudsman schemes - such as the Insurance Ombudsman Scheme - that the Financial Ombudsman Service has now replaced.

If, as it appears, Mr Bullivant took advice from an independent adviser before April 1988, then there are no grounds on which we can help him, as there was no voluntary ombudsman scheme for independent advisers before 29 April 1988.

Ray of hope

However, Mr Bullivant says that the sales commission went to the insurer.

I am unclear what he means by this - but it could be important. The normal procedure is that the commission goes to the adviser who sold the policy.

Financial Ombudsman Service (FOS): Fact sheets on its website (see link on right), or contact its helpline (0845 080 1800)
Financial Services Authority (FSA): Fact sheet "Your endowment - have you acted yet?" available on its website (see link on right), or by calling 0845 456 1555
Financial Services Compensation Scheme (FSCS): Information on making a claim and Q&As on website (see link on right)

If, in this case, the commission went to a firm, and not to the individual adviser, then it is possible that the adviser may not have been "independent" after all, but either employed by the insurance company or "tied" to it.

And if the firm was a member of one of the old ombudsman schemes, then we can look at the complaint.

Mr Bullivant should check the paperwork he received when he bought the policy and see if it makes any reference to the adviser's relationship to the insurer (such as "tied agent (or appointed representative) of the insurance company").

If he finds such a reference he should contact our consumer helpline - 0845 0801800 - to see if we can help.

If it turns out, after all, that the adviser was completely independent, then I'm sorry to say that there really isn't any other source of help I can suggest.

In certain cases the Financial Services Compensation Scheme can pay out if an authorised firm is unable to meet claims against it, usually because the firm has gone out of business.

However, the Financial Services Compensation Scheme would not be able to assist Mr Bullivant, as the scheme can only look at claims involving firms which were authorised and events which took place after August 1988.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.




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