Please don't let me be mis-sold a dud

Allegations of mis-sold investments and tirades against unfair mortgage contracts have been plastered all over the front pages of the papers (and the facing page here) in recent weeks. This is more than just coincidence.

The Government is preparing to shake things up. Mortgages are the first target because their sale isn't regulated under the law; but there is plenty of room for improvement in the sale of pensions and other investments. Here, buyers do have protection under the law - but the law isn't working very well.

Some salespeople and financial advisers obey the letter of the financial services law - they are being "compliant" with the rules - but not its spirit. Salesmen ask the right questions and tick the right boxes. But if they sell a commission-laden, inflexible product - many endowment policies and personal pensions fall into this category - then surely that counts as mis-selling just as much as the 1980s salesman who was told to say anything in a bid to meet his sales targets on personal pensions?

Until now these problems have been compounded by a complex system of regulation. There are eight different ombudsman schemes you might call on with an investment problem. And that doesn't include the Pensions Ombudsman or the Investors' Compensation Scheme (for clients of companies that have gone out of business).

Under the powerful new single regulator, the Financial Services Authority, we'll have one-stop-complaining. And let's hope there will be a mass of soul-searching and revelations about other mis-selling scandals. Two to watch are free standing additional voluntary contributions (FSAVCs are top-up pensions sold by financial advisers) and pension drawdown schemes (where retiring people don't buy an annuity but leave most of their pension fund invested in the stock market).

FSAVCs and drawdown schemes pay generous commission to the people who sell them. So do endowments and personal pensions.

If the Government im-posed a strict top limit on commission payments for sales of endowments, I think it's fair to say we'd see fewer of these contracts sold. Personal pensions are already feeling a chill wind as the industry prepares for stakeholder pension plans, which will put a tight lid on charges and commission.

The fault is not all on the side of the sellers. They have to make a living and the system demands they do it through commission payments. There is an element of caveat emptor here. Many people are ignorant about their own finances.

But even when we make an effort to learn what's going on, we are hampered by jargon and misleading statistics. And we all make mistakes. I've just had to pay pounds 3,000 to escape from a long-term fixed-rate mortgage.

You can change your home, job or partner for something more suitable; but an inflexible financial deal lasts forever.

n i.berwick@independent.co.uk

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