As they say, what goes around come around……

An official ruling last week has caused further confusion in the mortgage endowment market, where many IFAs were hit with compensation claims as client endowments failed to cover the value of their mortgages, as had been “promised”. The Financial Ombudsman has ruled that an IFA who was previously forced to pay out compensation can, in the event that the policy is in surplus at the end of the term, claim back all or part of the compensation paid out.

Not only does this ruling further muddy the water, but it will also cause major logistical problems with IFAs now obliged (for their own benefit) to monitor all final endowment payouts.  Even though this ruling does seem fair on the surface, it does not seem to take into account the pressure and financial strain which many endowment holders felt.  In some ways it seems that IFAs will possibly benefit from a rebound in investment returns (if it happens) even though their advice may well have been technically flawed initially.

Many experts are now expecting a mass of IFAs to take court action to retrieve as much of their compensation payments as possible.  It seems that while many thought the endowment issue was dead and buried, this may not be the case.

It also open the door for a possible reversal of past claims in other areas, where the financial markets may well have bailed out advisers if investment instruments were left to mature.