FSA determined to give endowments a fair trial
In the face of a barrage of media criticism of endowment
mortgages, FSA press officer Sarah Modlock
explains the regulator's viewpoint
By providing perspective and encouraging investors to talk to their
adviser, the FSA is placing responsibility and control in the hands of the
industry. Our hope is that firms wield this sensibly and make the most of
the opportunity to limit any damage which any poor initial advice may have
FSA chairman Howard Davies has provided some much needed perspective in
interviews, speeches and in his evidence to the Treasury select committee.
He is on the record as saying the vast majority of endowments are expected
to do well.
Treasury economic secretary Melanie Johnson has added her voice to the
call for balance and has made clear her understanding that "people
who have a shortfall may not necessarily have been badly advised".
ABI deputy director general Tony Baker has even braved the wrath of
Watchdog presenter Ann Robinson this month when the "endowment
scandal" featured on the BBC TV programme.
Insult will be added to injury if investors rush to give up their
endowments. The potential for even greater disadvantage is considerable.
Surrender in haste, repent at leisure.
In attempting to provide balance, the FSA is not ducking problems which
may be facing the endowment market. In particular, we have received a
large amount of anecdotal feedback about 25-year endowment policies sold
to people in their 50s and 60s - something which is clearly questionable.
But we must deal in facts. We have devoted a series of visits to firms to
establish what is actually happening in the field. Following analysis of
the results, the FSA will have a clear picture of any further work which
needs to happen.
This will also be a crucial time to provide further information and
reassurance to consumers. In the meantime, let's not throw out the baby
with the bath water.
If we believed everything the media told us, we would eat
nothing, drink nothing and probably think twice before leaving the house
We would also keep all our money under the mattress or, if you take the
Independent on Sunday's advice, a sock.
The fact is that we live in a world full of risks and, therefore,
actuaries. The good news is that most of them have long odds- the risks,
Anyone who has had their eyes and ears open in the last few months would
be forgiven that dodging traffic on the M1 is less risky than having an
My faith in much of the media has nose-dived due to the prolonged
onslaught of hyperbolic nonsense about endowments.
What started as a series of reasonable concerns has spiralled into the
portrayal of endowments as the source of financial ruin for the British
public. I do not recall endowment policies being among the evils in
As I write, the wacky race is still on for the next angle which could
make or break the reporter's name.
Into this angry sea of coverage, the FSA has twice issued its consumer
lifeboat: a plain English fact sheet entitled, Endowment mortgages
- what to do if you are worried.
This places great emphasis on a clear and essential message; never cash in
your policy or stop your payments without taking advice first - or you may
lose out. This has been conveniently ignored or obscured by those who have
been too busy worrying sheep.
The FSA has brought some facts to the table and is providing constructive
and impartial advice.
Many of the 3,000 or so people who call our investor help line each week
are looking for basic facts and reassurance. They feel worried and
confused by talk of product bans, debates over projection rates and
misleading cobblers about criminal misselling.