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Monday, 18 September, 2000, 15:20 GMT 16:20 UK
Facing the endowment crunch
A consultation with a financial adviser
Thousands claim they were misled over endowments
By BBC News Online's Bob Trevelyan

It looked like any other letter from the mortgage provider. But to Steve Gibbs, it felt like a body blow.

His endowment policy, he was told, would fall short. Not just by a few thousand pounds but by up to 14,700, nearly a third of the outstanding total.

We were naive at the time... but were sold something that was clearly not suitable for us

Steve Gibbs
Mr Gibbs, who owns a house in Carlisle, is one of thousands of homeowners across the UK who are now living in fear that their endowment policy will not be able to repay their mortgage.

When he and his wife found out that they may have to pay extra, they were shocked. Both feel they were misled about how their investment was likely to perform.

"The risks were very downplayed," he told BBC News Online.

"We were naive at the time... but were sold something that was clearly not suitable for us."

'No nasty surprises'

Steve took out an endowment mortgage with Friends Provident in 1988 to repay a 39,000 loan on the family home. Until a month ago he believed that things were going according to plan.

As recently as February 1999 his mortgage provider assured him that the policy was on target and that "there should be no nasty surprises" when he came to repay the mortgage.

They were commission-drunk salespeople rolling in it, [their behaviour was] negligent, selfish and greedy

Steve Gibbs

But in August a letter dropped on to the doormat telling him that he would probably end up with a shortfall of between 9,200 and 14,700.

"I am sure other people are as perplexed as we are," Steve says.

"They [Friends Provident] were presenting this rosy picture last year and I resent that."

Now Steve has been told that he should start putting more money aside to be certain of repaying his mortgage.

Standard letter

Steve wrote to Friends Provident to complain but says he received only a standard letter in response, telling him that he should address any complaint to the financial adviser who sold him the endowment.

"They just washed their hands of it," he says.

He is now trying to track down the independent financial adviser who sold him the endowment mortgage, but says this is not proving easy as the company moved from the estate agency in which it used to be based.

If his complaint is not resolved by the adviser, Steve can only take his case to the Personal Investment Authority ombudsman.

Unsuitable product

To establish that he was a victim of mis-selling and qualify for compensation, Steve would have to show that he was given poor advice, sold an unsuitable product and suffered financially as a result.

He admits to being unfamiliar with stock market investments at the time he took out the policy and says he stressed to the adviser that he wanted to be sure of being able to repay his loan.

Steve says he even asked for a repayment mortgage but was "heavily discouraged" from taking one out.

"We were told this was not an option," he says.

Extra savings

He says the risks of an endowment policy were not made clear and he was not told that extra savings contributions could be necessary in the future.

In their earlier letter, Friends Provident had suggested five different measures Steve could take to bump up his savings to cover the expected shortfall.

He is now talking to another independent financial adviser about what course of action he should take but remains bitter at his experience.

"They were commission-drunk salespeople rolling in it," he says.

"[Their behaviour was] negligent, selfish and greedy."

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