With Profits Bonds established themselves in the mid 1990s as a core product for the financial services industry. With strongly performing stock markets and interest rates at nearly double today's rates, it was easy for firms to demonstrate that a bond could easily outperform a building society account.

The bonds earned the life insurance industry a fortune in policy charges. Likewise, financial advisers were encouraged to sell them by commission rates that were unmatched by any other comparable product.

History shows though that when these two factors are in play - high charges and high commission - mis-selling is the inevitable result. And so it has proven again.

Hidden away in the small print of the bond's terms and conditions were significant risk factors that commission-hungry salesmen hardly ever mentioned. And which all too often their paymasters didn't want mentioned either.

Nobody explained what would happen if the stock market went into reverse (as it did between 2000 and 2004 and again in 2008 following the biggest financial crisis since the Wall Street Crash). Or, if interest rates fell to historically low levels (as they have done).

The truth is that With Profits Bonds were built on sand. In order to mask the high charges and pay for the big commission payments, it was essential to have strong investment growth. When that stopped, the value of bonds started to decline rapidly. So much so that two nasty surprises were revealed to unsuspecting policyholders.

Firstly, any bond holder taking regular income noticed it was starting to eat into their capital.

Secondly, anyone wanting to cash-in their bond was hit with a so-called "Market Value Adjustment (MVA)".

This tool (hardly ever mentioned by salesmen) effectively enables the insurance company to decide what the value of your bond should be. It has free reign to reduce the nominal current value of the bond to any level it wishes.

With stock markets declining from 2000 onwards, MVAs were used to deter people from surrendering their bonds. To do so would mean you would be paid back much less than you had invested. To make matters worse, most insurers reduced their share holdings considerably as the stock market declined. This meant that With Profits Funds hardly benefited at all from the rises in the market from 2003 to 2007. But, of course, they had just started investing in shares again when the financial crisis hit in 2008. The result is that MVAs are still in force and here to stay.

Many bond holders are locked into a product that earns very little (if anything) in bonuses; from which income cannot be taken without it eroding the capital; and from which it would cost thousands of pounds to escape.

This would be bad enough if people had been warned of the risks. But too often they were not. Even worse, bonds were deliberately aimed at people that were used to risk-free building society accounts. The result was that many people sold bonds on the basis that they were a better bet than building societies were mis-led.

Proving that the bond wasn't suitable is often quite difficult but it can be done and if a case can be won then you will be entitled to compensation, which will wipe out the MVA.

If you would like to consider making a claim for compensation then please go to the Claim Now page and get in touch with me.