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CHAPTER 7

RISK

7.4.2The Positive Representations Made
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When an individual consumer decides to invest in a particular Investment Fund, the decision as to choice of investment is based on a comparison of the Financial Analysis Data pertaining to that Fund with the Financial Analysis Data pertaining to other Investment Options.

Such a comparison requires a knowledge of Financial Analysis and, while it may be done by a well informed individual, it is generally entrusted to a party with expertise in such matters.

The individual consumer seeks expert advice.


The Irish Life Assurance Company and the First National Building Society are experts on financial investment matters relating to individual consumers. They made positive representations to my wife and I on the comparison of the Financial Analysis Data pertaining to an Endowment Mortgage and a Repayment Mortgage (see Case 1 of Appendix 1/2).


These representations constituted the entirety of their disclosure of the material facts necessary to make an informed decision between an Endowment Mortgage and a Repayment Mortgage.
These representations were used to reinforce their expert advice to me that the Endowment Mortgage clearly presented the best Mortgage Option.



The representations by Irish Life and First National of the comparison of the Financial Analysis Data for an Endowment Mortgage with that for a Repayment Mortgage are presented in what appears to be a clear and customer-friendly comparison format. (See Case 1 and Case 2 of Appendix 1/2.)


The prominent thrust of these representations
(and of the expert advice based on same) is that, by choosing the Endowment Mortgage, for a mere additional £496 Total Net Outlay Over Term (this for Case 1; see Appendix 1/2), a mere additional £2.07 per month, there is the prospect of receiving the substantial Surplus of £12,770 After the Loan is Repaid or, alternatively, for this additional £2.07 per month the loan could be repaid 2 years earlier than is the case with the Repayment Mortgage.



But it is clearly evident from the foregoing sections of this Chapter that a proper evaluation and comparison of Investment Options can only be done on the basis of the fundamental Financial Analysis Data pertaining to each Investment Option.

For each Investment Option we require a measure of:

(1)

the Expected Return.

(2)

the Risk taken by investing in that Investment Option.

(3)

the Reward for Risk taken by investing in that Investment Option.

These are the fundamental Financial Analysis parameters NECESSARY to an informed investment decision.


The representations by Irish Life and First National, of the comparison of the Financial Analysis Data pertaining to an Endowment Mortgage with that pertaining to a Repayment Mortgage, totally abstained from providing information on all of these fundamental Financial Analysis parameters.

They choose to remain silent.

 

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