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How we were forced out of business

Our business began in 1982 as a mortgage arranger. We decided to become an IFA to offer independent advice to our clients on mortgages, life, investment and pension products.

The introduction of Miras made it advantageous to clients to take out endowment mortgages at the time. Many people switched from repayment to endowment mortgages, which were cheaper and offered the possibility of a cash sum after the morTgage had been repaid or the option of early repayment, subject to growth over the term.

Our clients were always offered a choice of mortgage but many people asked for endowment plans. We rarely received any customer complaints and were able to secure affordable professional indemnity insurance each year.

Regulated by Lautro, Fimbra, the PIA, FSA, MCCB and GISC, we ensured all our consultants complied with the rules of the various bodies.

In 1996, we began the pension review and employed a consulting company to ensure we carried out the review correctly.

We found that when it came to settle on pension review claims, the PI insurer refused to honour the claims, which had to be settled by ourselves. We sought legal advice and were told we had a good case against the PI insurer. In the end, the PI insurer settled voluntarily, but only for an amount of £15,000, which we accepted, on the basis that taking further action would have been unaffordable.

The pension review ultimately cost the firm over £130,000. In 1999, we began to receive mortgage endowment complaints. We found we were able to reject these. Of those referred to the PIA Ombudsman, most were also rejected.

No complaints were received before 1999. Complaints were made after 1999 due to a change in legislation which meant clients had to receive reprojections at lower growth rates as a result of the fall in stockmarket returns and poor bonus rates declared by the insurance companies.

From 2001, complaints increased substantially. We also had compliance audits by external consultants at this time where our handling of complaints was checked. No breaches were identified.

In 2003, the dramatic increase in complaints received was becoming a strain. However, we were heartened by the fact that the Financial Ombudsman Service was rejecting a lot of the complaints referred to it.

In October 2003, the FSA undertook a risk assessment on our firm and looked at our handling of endowment complaints. In December 2003, the FSA requested a skilled person’s report in respect of complaints. This was carried out by a firm with agreement of the FSA at a cost to us of £15,000.

In November 2004, we received the report which stated that the cases rejected by the FOS should have been upheld. We were also told we should not have rejected complaints where we had no original file. However, most of the complaints related to advice more than 15 years ago and we were only required to retain the files for six years.

In December 2004, the FSA indicated it might reopen each of the failed cases and that we might have to re-investigate all complaints from 2000-04.

To make matters worse, Standard Life removed its 6 per cent promise which meant policyholders were further angered and complained to our firm.

We have been confused by inconsistency between FOS and FSA handling of complaints.

In January 2005, the FSA asked what we proposed to do. At this point, we took professional advice and were told we had little alternative but to put the company into liquidation.

The FSA was not satisfied with forcing our company out of business and we are now still being pursued by the FOS. Our only course of action is to seek a judicial review, while the FOS seems to have unlimited funds at its disposal, funded by IFAs.

I am sure there are many IFAs and ex-IFAs in a similar situation. I urge all IFAs to support the IFA Defence Union in its quest to force the FSA to disclose information about the “Lautro 12” life offices. Maybe then we can get compensation for all the wrongs imposed on us by incompetent regulators.


Name and address withheld


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