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John Joseph on Protection

As this column is all about protection I thought I would widen the remit to include protecting our profession.

I am sure I am not alone in being bombarded with emails which promise to make me rich beyond my wildest dreams.

We have to make a decision as to what we read, as too much information gives us overload and a jackdaw mentality, leaping from one thing that glistens to the next, never laying down continuity.

The investment houses operate in a similar fashion, launching new funds which are simply old ones dressed up to go to the ball.

Among all the email traffic that flits across my screen, there is one email I actually look forward to, Steve Pett&#39s www.IFAbonus.co.uk. If you are not on his mailing list, I suggest you pick up this freebie as it gets you all over the IFA world.

If you or members of your staff want to use directory enquiries and like me object to paying for it, IFAbonus has a free directory.

Stuck with a client that does not know their doctor&#39s name or address, look on the site. Need an insurance company address, a forum to talk to, a method of distributing messages to thousands of IFAs, Steve is your man.

But the reason I want you to look at this is that hidden deep in a link on the site is a missive from the FSA relating to misselling. There are six pages of explanation as to what is expected to be demonstrated in the case of a complaint but, interestingly, the last paragraph contains the wonderful news: “In relation to misselling we will not act with hindsight or inverting the burden of proof which would otherwise apply and industry wide reviews of past business cannot proceed without Parliamentary approval of a specific order made by the Treasury.”

There is also a little gem on the second page which says: “In considering what degree of protection is appropriate, we are obliged to have regard to the principles that consumers should take responsibility for their own decisions”.

As long as I deemed an endowment “suitable” I, apparently, can&#39t be faulted on the performance of the underlying fund.

Well here is the good news for all my clients who are getting red letters. I deemed endowments suitable, as in those days, with-profits were returning between 8 to 12 per cent. With-profits smoothed the peaks and troughs and had done for many years.

With-profits carried an element of life cover, which was normally required by lending institutions and had been for many years.

Endowments came with quotations which invariably showed three assumed rates of growth, one of which showed a shortfall. With-profits quotations talked about bonus projection. The word “guaranteed” next to the word bonus was no where to be seen unless it said: “Once declared, your bonus will be guaranteed at the maturity of the policy.”

Because I believed so much in endowments I took three of them personally, so on the basis of being suitable for me, why should they not be suitable for my clients? After all, for 34 years people have been asking me: What would you do if you were me?

On the basis, I thought endowments were a good bet, low risk and a clever way of keeping overall costs down when stretching to buy a house, I was hardly likely to say to a client “I think you should ignore my advice as I am a poor judge of the future, and I think there is going to be a God almighty financial crash in 10 years which will change our view of the world of investment.”

If we could all see 10 years into the future America would hardly have supported Saddam Hussein in the late 1980s and Tony Blair probably would have had second thoughts in 2002.

So, I will now be able to advise the ombudsman that I have lightened his potential caseload because there are no cases to answer.

If someone in the ombudsman&#39s office would like to comment on the above, and have their reply posted on the internet and in this paper, I will be delighted to open a discussion.

John Joseph is managing director at John Joseph Financial Services

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