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&#39Commission to blame for endowment crisis&#39

FSA chairman Sir Howard Davies has blamed commission to advisers for the misselling of endowment policies.

Davies told the Association of Friendly Societies&#39 annual conference in Brighton last week that it was the fault of advisers that unsuitable endowments were sold.

He expressed surprise that not all policyholders were told their policies were not on track to repay their mortgages at the end of the period.

But Davies defended the decision not to hold a full review, saying the question he had to address was whether a full-scale review would be a proportionate response.

He argued that a full-scale review would have cost £5bn, which inevitably would have been passed on to policyholders.

Despite the fact that there have been some problems, Davies said the evidence indicates most endowment holders are better off with their mortgage than they would be if they had taken out a simple repayment product.

But he said close attention will be paid to individual firms and their selling practices and they could be disciplined if evidence emerges about misselling practices.

He said: “The reason why so many policies continued to be sold is because the commission structures were attractive for the salesmen and advisers in the front line.”

Aifa director of policy and technical services Fay Goddard says: “I do not think commission was the big influ- encing factor with independent advisers. The turning point was when projection rates were altered. Until then, the products were still extremely viable. That should be looked at more closely than commission.”

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