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Mark Wayman loves trawling for money. And he knows where £90m of it sank without trace last year. The cash could have gone to 60,000 endowment policyholders - but they did not know it was there, just waiting to be netted.
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Wayman, an independent broker in the traded endowment policies market, says: 'I talk to many people who surrendered policies to their insurance companies and lost sizeable sums because they had not heard of TEPs.'
After 27 years as an independent financial adviser, he set up his own company, Endowment Surrender Plus, 15 months ago. 'I'd known about trading endowments for some time, but I came into the business when a client wanted to sell a policy,' says Wayman, 47. 'I was astounded at the difference between offers and recognised the need for someone who could fish for the best prices. Now that is the only thing I do.'
The whole business of selling and buying with-profits endowment policies began more than 150 years ago. As recently as 1989, total turnover was only £5m - but last year the TEPs market was worth more than £400m, and it continues to boom. In contrast, new endowment policies are becoming as rare as North Sea cod because of past misselling scandals and, more recently, warnings of shortfalls in maturity values.
Despite the success of the TEPs market, one industry estimate is that only about one in three suitable policies is offered for sale. Up to £700m worth of potentially tradeable policies are surrendered to the insurance companies that issued them. Every year, about 60,000 people surrender policies and miss the chance to sell them for an average of up to £1,500 more.
Selling a policy keeps it a tradeable asset. The advantage to a buyer is that as long as they go on paying the premiums, they hold an endowment with start-up costs already paid, and the full benefits when it matures.
From his office in Macclesfield, Cheshire, Wayman sends details of endowments that clients want to sell to 15 members of the Association of Policy Market Makers and the Association of Policy Traders to find the best prices. His commission, usually 3%,is paid by marketmakers, who also pay all the legal and administration fees.
Wayman admits that not every surrender value can be beaten. But he says that between 10% and 40% more is achievable on most offers - and on some policies the gain can be more than 70%.
'It's all down to pure mathematics and common sense,' he says. 'The sum assured is guaranteed and so is the bonus to date. The only risks are in future reversionary bonuses and the terminal bonus, which can make up more than 60% of a policy's maturity value. That's why surrender value is rarely the true value.'
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