Even before the pension transfer scandal has got into full swing, the consumer press is turning its attention to another apparent example of bad financial advice.

This is the plight of those victims of the negative equity trap who have been obliged to surrender their mortgage endowment policies only to find that their value has been consumed by charges and commissions.

The conclusion we are invited to draw is not just that the heinous life insurance salesmen have struck again, but that endowments would not have been recommended, had it not been for the generous commissions which they generate.

Ergo, endowments are a bad deal.Analysis of the facts suggests that this may be an unjustified conclusion.

Endowments have served policyholders well, despite their relatively high charges and opaque design, provided that the policies have been maintained to maturity.

It has always been the lot of those who surrendered early that their premiums assisted to bolster the maturity values of the small minority who saw their policies through to maturity.Significantly, this situation has now been addressed.

SIB's retail regulatory review of 1994 has resulted in the long awaited 'hard' disclosure of commissions at the point of sale, with effect from 1 January 1995.

Product providers must now also supply 'key features' documents, detailing the effect of charges on surrender values throughout the life of a policy, and on maturity values.

Life and pensions companies have responded positively to these stimuli, improving surrender values across the board, and introducing flexible commission structures which ena ble intermediaries to select whatever level and period of remuneration they can justify to their clients.Consequently, endowments can now stand comparison with other, previously more flexible, savings vehicles.

So how do they compare, particularly with that paragon of charge-transparent tax-free investment championed by the press as their successor, the personal equity plan?The answer is that you pays your money and you takes your choice.

As a straight investment vehicle the PEP is clearly superior.

However, it provides no protection against stockmarket fluctuations and cannot replicate the 'smoothing' of returns, which is the hallmark of the most popular type of endowment, the with-profits policy.

Also, the endowment provides a cost-effective package of optional elements, such as critical illness cover and redundancy and sickness protection, which must be bought separately alongside a PEP, and at greater cost.In addition, because PEPs are an annual investment it cannot be guaranteed that they will remain available to provide the continuity required to fund a loan to maturity.

Questions are already being asked as to whether PEPs would survive a change of government and even whether the present government can afford to permit the current level of tax leakage to continue.For many people, therefore, the endowment remains the solid building block on which mortgage provision can suitably be based, and the professional adviser must ensure that the attendant charges and commissions are reasonable and competitive.

PEPs, on the other hand, are best regarded as a top-up vehicle on subsequent house moves, while pension mortgages are attractive to the permanently self-employed, who are able to arrange their mortgage repayment to coincide with retirement.The major decision, however, is not so much between endowments and PEPs, as between interest-only and repayment mortgages, or indeed whether to opt for a part interest-only, part repayment package.Here there are two main factors to be considered.

First, the period of the loan and the frequency with which the house buyer is likely to move house.

Repayment mortgages penalise the frequent mover because in the early years of a loan all but a small part of each payment consists of interest, and consequently the amount of outstanding capital carried forward to the next purchase is hardly diminished.The second factor is the long-term prospects for investment markets and the purchaser's attitude to risk.

Endowments have thrived in the buoyant conditions of the past 20 years, when it could safely be assumed that over any extended period of time the returns on stockmarket-based investment would comfortably exceed the cost of borrowed money - particularly when the borrowing was at the favourable rates which apply to mortgage lending and was tax-assisted.Actuaries have calculated that there needs to be a 2% positive differential between interest cost and investment returns to justify keeping a mortgage loan outstanding for its duration.

The actual differential since the war has been 5%, but in the low inflation, high unemployment climate which now obtains in the developed world, investment returns are likely to remain muted.

The decision, therefore, has become more marginal.Those who sold endowments at the top of the market were simply following the norm; the worst criticism which can usually be levelled against them is that in striving to match a purchase price, they based their calculations on over-optimistic growth assumptions.

Endowments represented some 70% of the market and still acc ount for over 60%.

However, it will take an upturn in the housing market before the rumbles of discontent subside.

Meanwhile, there may be some solicitor estate agents who feel a sense of relief that, despite their remonstrations, the Law Society stood firm on its practice rule 6 prohibition against the sale of policies to purchasers.Of perhaps greater concern to the profession might be the question of the extent to which matrimonial lawyers might have assisted in the surrender of joint life policies, when more attractive alternatives were available.

Financial services have now become so pervasive that no legal practitioner can afford to be ignorant of their effect on their work.