Traded life policy investments (TLPIs), which are sometimes called ‘death bonds’, are complicated products generally unsuitable for the mass retail market.
They are also known as ‘death bonds’ because the ultimate investment is in life assurance policies, typically of US citizens. Investors hope to benefit by buying the right to the insurance payouts upon the death of the original policyholders.
They are sometimes also known as ‘traded life settlements’ or ‘senior life settlements’.
TLPIs may pay a regular income or can aim to grow in value over time. Most death bonds are sold as unregulated collective investment schemes (UCIS), but some take other legal forms.
Our review of sales in the TLPI market revealed high levels of unsuitable advice. We are worried that this market could grow and cause further customer losses in the future.
As a result, we have recommended that these products should not reach ordinary retail investors in the UK. This would mean that firms should not be marketing, recommending or selling these products to the mass retail market.
TLPIs are usually marketed as offering strong returns that are unrelated to stock market performance, which makes them appear attractive at a time when more traditional investments are not doing well.
In actual fact, TLPIs are high-risk investments. In particular:
The products can fail entirely and customers can lose a significant amount of money.
If you were advised to invest in a TLPI, your financial adviser should be able to explain why they thought the investment was suitable for you. If you invested in a TLPI without advice, you may wish to seek independent advice on it and on what your options may be.
If you no longer think your TLPI is the right investment for you, speak to a financial adviser to discuss your options.
If you believe you were mis-sold a TLPI, you should contact the firm that arranged the investment for you and raise your concerns. They should have a procedure to follow to resolve matters with you. If you are not satisfied with their answer or proposed resolution, you can take your complaint to the Financial Ombudsman Service. If the adviser’s firm has gone out of business, the Financial Services Compensation Scheme (FSCS) might be able to help – but see below for more on why the FSCS might not cover investors.
Protection for an investment in TLPIs depends on where the firm is based that holds the customer money.
Most of these products are offshore and so are outside of our regulatory scope. This means investors are unlikely to be protected by the FSCS if things go wrong.
For this reason, investors may also not have access to the Financial Ombudsman Service. It may still be possible, however, to complain about advice given or marketing material produced in the UK by an authorised firm.
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