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For the record

Under normal circumstances, it is only a very plucky journalist – or a completely mad one – who takes public issue with something his editor has written about only a week earlier. Happily, Money Marketing is, as we all know, a bastion of tolerance and freedom of expression.

Which makes it possible for me to say that, while I have a lot of sympathy with the plight of Ivan Massow, who faces potential financial ruin over alleged endowment and FSAVC misselling complaints, I also believe he is in part the author of his own misfortune.

Ivan says homophobia, then prevalent in the industry, meant he had no choice other than to recommend that gay clients he advised should take out FSAVCs in preference to AVCs because “it was the only way to ensure money was passed to their partners”.

In last week’s article in MM, Ivan said the reason he did not recommend other investment products other than FSAVCs was because of inheritance tax issues.

As for mortgage-linked endowments, Ivan says this was the only way of providing life cover without the necess-ity of lifestyle questionnaires. Had a questionnaire been filled in, either the case would have been turned down by the insurer or the premiums would have been massively loaded.

Now, I have a massive degree of sympathy with Ivan’s position. I was an MM journalist in the early 1990s and one of the first things I learnt was the way in which insurers penalised gay people when it came to the premiums they charged.

Under such circumstances, it was probably much better advice for anyone who needed life cover to take out an endowment in place of a repayment mortgage. I remember Ivan arguing the same points in 1992.

The problem I have, however, is over record-keeping. When I first trained as a journalist, I remember being told that the only defence against accusations of libel and misrepresentation was to keep your shorthand notebooks for six years.

Yet here was Ivan, in an incredibly brave – and politically exposed – position who clearly did not feel the need to keep any serious records of his own advice to clients. Or, if he did, all this stuff somehow got lost in between ownership changes at his company.

Even so, on a purely moral basis, I would still be inclined to give Ivan the benefit of the doubt over endowments.

The difficulty I have is with FSAVCs. It is correct to say that an FSAVC is preferable to an AVC in case where a company scheme does not permit pension benefits to be passed to partners of equal sex. But if this is part of a defence against specific claims of misselling, then it should not be too difficult to establish the fact that a certain scheme operated such rules at the time.

Then there is the issue of being able to commute an FSAVC into a lump sum if you can prove you only have a year to live. Again, such a point is very valid. But so is the counter-argument that there were other suitable investment products that would have fitted the bill just as easily.

I stand to be corrected but I am unaware of any inheritance-linked issues that might adversely affect the passing on of one’s unit trust assets, as distinct from those held in an FSAVC. Presumably too, cashing in unit trusts is also much easier than “cashing in” an FSAVC.

What the real difference might be between both products, and again I stand to be corrected by those more knowledgeable than me, is that an FSAVC paid a considerably higher level of commission than a unit or investment trust did to the adviser who recommended it.

Were this the case and I may well be mistaken, then Ivan is partly being punished for something he was 100 per cent right to do – steer a client away from an unsuitable AVC. Yet by recommending an FSAVC instead of an alternative investment, he would have been behaving no differently from any of the other grubby commission-chasers operating in the industry at the time.

Quite what his clients, to whom Ivan must have seemed like the answer to their prayers, would make of their adviser’s behaviour if this is true is anyone’s guess.

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