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5 ways you're being fleeced by the finance industry

20/04/2018

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Dodgy innovative finance products, overdraft charges, energy bills...we've updated this list to cover a few nasties for 2018. If any of these apply to you, we've suggested some fixes as well. Happy financial spring cleaning!

While we don’t want to speak ill of the finance industry, like a 5-year old with a sweetie tin, you have to keep an eye on it, otherwise it can misbehave. Sometimes it can feel like an ongoing game of ‘whack-a-mole’, in which you just get rid of one bad product and another one pops up. With this in mind, we’re updating our piece on the five ways you’re being rinsed by the finance industry – though you may still see a few favourites in there.

  1. Innovative finance.

It’s not so much that there is anything wrong with the basic concept. Peer to peer lending, disintermediating those big banks, power to the people and all that, that’s all fine. It’s more the way it’s being sold. We’ve found a couple of the innovative finance ISA groups flogging this as a ‘cash-like’ product. It isn’t. And worse, you’re not paid much for the risk you’re taking.

There’s also the uncomfortable way that innovative finance ISAs act as if they’re on the side of the people, hoofing it to the nasty old finance industry. We’d argue that the finance industry are offering a more compelling return in many cases and investors are better protected – innovative finance ISAs don’t have the protection of the Financial Services Compensation Scheme. Proceed with considerable caution.

     2.  The big bad energy companies.

Government and regulators have become so frustrated with the intransigence of energy companies that parliament is currently debating a bill that would introduce caps on the amount energy companies can charge. In particular, they are cross that so many customers remain on Standard Variable Rates. Theresa May says the bill will “force energy companies to change their ways”.

In the meantime, it takes 10 minutes to walk through a comparison site to plug in your details and find a better deal. The average person can still save north of £200 by doing this.

  1. Overdrafts.

Credit cards used to the real baddy of the finance industry, with rates of around 10-20%. Many have mended their ways and it is usually easy to transfer the debt on a 0% balance transfer. Today, the big problem is overdrafts. Overdrafts from some of the mainstream banks are now in excess of 50% of the balance.

This is higher than distressed credit or even some payday loans. The FCA is likely to turn its attention to these mainstream overdraft fees, but in the meantime, don’t pay them. Change bank accounts, get a loan, get a balance transfer credit card, find any cheaper option you can.

  1. Auto-renewing your insurer

Yes, this is here again. In fact, a recent FCA report found that insurance companies are failing to implement new rules to increase transparency and encourage shopping around. So, don’t let them win. Stick a note in your diary a month before contracts expire and take 10 minutes to shop around on a few comparison sites to see what other deals are out there. We had one report of a medical insurance premium increasing by 50% year on year, with no improvement in the cover and no change in the circumstances of the insured. They’re sneaky. Watch out.

  1. Being seduced by investment fads

Yes Bitcoin, we’re talking about you. Or the company that’s just on the verge of finding rocks of gold in the Peruvian desert. Or the one that’s about to covert pebbles into US Dollar bills. It’s nonsense and it will lose you money. Invest properly, for the long term, in a diversified collective fund and don’t muck about with single stock investments unless you really, really know what you are doing. Bear in mind that the finest investment minds, who spend all day every day analysing investments still get it wrong around 30-40% of the time. Yes, the potential returns are seductive, but you’re far more likely to lose all your money.

Read next: We’ve reviewed all the online investment providers so you don’t have to

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Related Questions

Got a Question?

  • I am a British/Irish citizen living in Malta and have between £5k-£10k to invest for 5 years. Clearly, ISAs are out as there is a requirement to be a UK resident. I am happy to accept a medium level of risk, and would appreciate some info on where to put this to maximise returns.

    Phil | Malta | 25/04/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
    • Online Investment Platforms
    Zoë Dagless's Response

  • I've a Cash ISA with about £80k in it, so I'm considering moving £50k into a Stocks & Shares ISA. I'm 73, retired, married, a house-owner and would like to utilise my savings better. What would you recommend?

    Barry | Berkshire | 18/04/2019 | 0

    • Stocks and Shares ISA
    • Cash
    • Online Investment Platforms
    Helena Wardle's Response

  • I am a beginner investor and would like to invest in a "socially responsible" Stocks & Shares ISA. I have looked into the Nutmeg and Wealthify funds. Is there information about any other such providers on your website? And do you have any advice about how to compare the "socially responsible" criteria on the different funds?

    Joy | Glamorgan | 16/04/2019 | 1

    • Stocks and Shares ISA
    • Robo Adviser
    • Ethical Investing
    Phoebe Smith's Response

  • I have a young boy who will be turning 4 this month. He is British. I want to save some money for this innocent boy, for when he comes of age, but I live in Uganda and I am not in touch with his mum. Can I open a Junior ISA for him?

    Dennis | Uganda | 11/04/2019 | 0

    • Junior ISA
    Zoë Dagless's Response

  • I am 52 with money languishing in a low savings account. Now I'm neurotic about entering into Stocks and Shares, due to seeing how many investors have exited the stock market thanks to Brexit, and with companies going bust etc. But I need to make my money work for me as my pension pot is low. Can I put the money into an Instant Access ISA and drip feed this into a Stocks and Shares ISA?

    Helen | London | 09/04/2019 | 1

    • Stocks and Shares ISA
    • Cash
    Lesley James's Response

  • I'm in my very early 20s, and earning well. I have no debts or dependants. I have a Stocks and Shares ISA, and am weighing up the pros and cons of a General Investment Account vs a Private Pension. What should I keep in mind?

    Cecily | Berkshire | 08/04/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
    • Lifetime ISA
    • GIA
    • Workplace Pension
    Tommy Watson's Response

  • I've got a Stock and Shares ISA with Moneybox. I recently invested a lump sum with them, and I'm making regular weekly investments. When I invested, the share price was quite high. Should I have drip fed money into the account rather than depositing a lump sum?

    Tim | West Midlands | 05/04/2019 | 0

    • Stocks and Shares ISA
    Mark Dampier's Response

  • Our 16 year old son has inherited a significant sum. He wants to go to Drama School and pursue a career in acting, which we know means he is likely to be low paid/short of cash. I wondered how best to help him organise his savings/investments to help fund him through drama school/the early years, whilst trying to discourage him from simply dipping into his capital?

    Mo | West Sussex | 04/04/2019 | 0

    • Stocks and Shares ISA
    • Junior ISA
    Pete Matthew's Response

  • I intend to retire in autumn, aged 60 and would like to leave my son and grandson as comfortable as possible when I'm gone. I have talked with several IFAs, but given my risk adverse nature, their fees seem to eat up most of the benefit they offer. Do IFAs normally bring sufficient benefit to low risk strategies, to make it worthwhile? Or am I better off cautiously investing myself, and saving the fees?

    Stephen | North Yorkshire | 01/04/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
    Catherine Morgan's Response

  • Where can I get a good Junior ISA?

    Rebeccah | Greater London | 27/03/2019 | 2

    • Junior ISA
    Holly Mackay's Response

  • I am self employed (40) with no private pension, earning £50,000 a year. I have savings and can make a lump sum investment. I know nothing about Stocks or Shares. What is the best way forward for pension and tax reduction? Desperate Anna

    Anna | London | 25/03/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
    Holly Mackay's Response

  • For the last 9 months I've drip fed just over £10,000 into a Moneyfarm Investment ISA... it has been a very volatile year as you know. Moneyfarm seem to have done a good job of protecting my capital... however I haven't really made much in the way of gains... If I wanted, would I be able to transfer the whole lot to another platform where the fees are lower? I know you're not allowed to give regulated advice - but I'm uncertain if I should transfer the whole lot in one go, or drip feed.

    Robert | UK | 14/03/2019 | 2

    • Stocks and Shares ISA
    • Robo Adviser
    Holly Mackay's Response

  • I have about £100 monthly extra I want to invest, but I am not sure if my ISAs represent good value. I thought I could put the money in a higher risk investment, as it is money I can invest over 5-10 years, and had thought Nutmeg might be a good option as I have little investment experience. Am I right in thinking I can only contribute to one Stocks & Shares ISA at a time in my name? I could just put more money into my existing ISAs. What do you think?

    Colin | Lothian | 11/03/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
    • Online Investment Platforms
    Holly Mackay's Response

  • I am 47 and I would now like to open an investment ISA for growth for at least 10 years. I am tempted by the Vanguard LifeStrategy 80 due to the low fees and strong reputation. I would also consider investing in a couple of other Vanguard funds as well. Would this be advisable or relatively unnecessary, if I'm already investing in the LifeStrategy fund? I have also been looking with interest at Nutmeg, Wealthify, IG and AJ Bell Youinvest. Is there any provider that would stand above the others as most suitable in my circumstances?

    Matt | South Yorkshire | 11/03/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
    • Online Investment Platforms
    Holly Mackay's Response

  • If my son increases his pension contribution, I have read it may affect the amount he can borrow on a mortgage. Is this correct? Should he take a SIPP out as well? Is there any advantage in maxing out his managed Nutmeg Lifetime ISA in the next financial year?

    Richard | Hertfordshire | 06/03/2019 | 3

    • Private Pension
    • Stocks and Shares ISA
    • Lifetime ISA
    • Pension
    Holly Mackay's Response

  • I’m 36 years old, earn £85k, and have about £40k savings in the bank, mainly in an old ISA that I’ve done nothing with. I have a five year old daughter and would like to put my savings somewhere clever so they start to do something useful by the time she starts at an independent secondary school and fees go through the roof. Any bright ideas please?

    Milly | Berkshire | 22/02/2019 | 2

    • Stocks and Shares ISA
    • Junior ISA
    • Shares
    • Online Investment Platforms
    Catherine Morgan's Response

  • I recently came across your blog and it has been a great introduction to learning about my personal finances. I was wondering if you could recommend any additional resources (websites, books, online help) for beginners and that are tailored to the UK market. I am in my early 20's and I'm looking to further my knowledge of money, and foster a greater relationship with it. In addition to that, I'd like to know your opinions on how the possible outcomes of Brexit will affect the market and potential personal finance investments.

    Rita | London | 23/01/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
    • Online Investment Platforms
    Phoebe Smith's Response

  • I’m a 20 something year old woman who’d like to learn more about investing. Do you have any books or reading material that gives a complete beginner a better understanding of how investing works?

    Precious | Surrey | 03/01/2019 | 0

    • Stocks and Shares ISA
    • Online Investment Platforms
    Phoebe Smith's Response

  • From my retirement I received a lump sum of money and a monthly pension. I have £100,000 that I do not need for the foreseeable future... One of my main concerns with Financial Advisers are their costs... All I want is simply to see this money grow to its potential, sensibly and above inflation... Therefore my next thoughts are Stocks and Shares ISAs... My only concerns here are the current Brexit problems - I saw the FTSE drop this past week. I cannot find any information out there to assist with my decision making if this is certainly a good time to invest... I am aware that I can place £20,000 for this year. Come April 2019 I place another £20,000 and so on until the £100,000 has been utilised. Do I have to place it into the same fund or can I choose another different fund with a different company?... Please can you help to ease some of this burden, which has proved an awful part of my retirement and made me frightened to spend any money.

    Katherine | Derbyshire | 02/01/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
    • Cash
    • Robo Adviser
    • Online Investment Platforms
    • Workplace Pension
    Helena Wardle's Response

  • I often find that my monthly salary is spent on things I don't need or just saved up; without accumulating much. So what can I do with my money to make money? I am not expecting you to tell me where and when to invest but simply what to read, and I guess I really would like to know how you became an expert, where did you start? I feel like investment is something so big I can barely even touch it, and I would greatly appreciate any words of advice you could share with me.

    Beth | London | 07/12/2018 | 4

    • Stocks and Shares ISA
    Holly Mackay's Response

  • I'm the sole carer for my chronically ill and elderly mum, as well as a full-time police officer. I have no other family apart from her. Due to mum's condition, and the fact that I'm exhausted performing both roles, the only option is to go part-time, as mum won't accept help from anyone else. To allow me to go part-time, I will need about £25,000 until March 2020 when I will be retiring. I’m confident of getting another job shortly thereafter. In January 2021, I will receive a commutation lump sum of about £50,000. I have a sizeable fund portfolio under an ISA wrapper with Hargreaves Lansdown. That is doing very well, so I don't really want to sell any of these funds and 'lend myself money' from that. My ideal funding solution would be a bond-type IOU agreement, where 'someone' lends me the money. Are you aware of a peer-to-peer site that could assist? Thanks

    Dave | Hertfordshire | 27/11/2018 | 1

    • Stocks and Shares ISA
    • Online Investment Platforms
    • Other
    Holly Mackay's Response

  • I am 35 and working part time on a reasonable salary. I've recently taken out a Stocks & Shares ISA with Wealthify (from reading the recommendations on Boring Money) where I pay in £40 per month. However, I'm wondering if I should be doing more? Should I be diversifying and using more than just Wealthify? Or is it better to increase the amount into Wealthify?

    Holly | Sussex | 17/10/2018 | 1

    • Stocks and Shares ISA
    • Online Investment Platforms
    Lesley James's Response

  • I am 25 and starting to seriously financially plan out my future. I would really welcome a 'sense check' on my thinking as well as some help on which investment choices to make. My goals are: To invest for 15 years - my risk appetite is very high (i.e. I could afford to lose all my money). Goal 1 - More Important: To have an investment pot of £1,500,000. Goal 2 - Less Important: To be mortgage free. My plan is: 1) Open an annual Stocks and Shares ISA each of the next 15 years. 2) Open Share trading/dealing account. 3) Reduce my mortgage term to 6 years by 2025. I appreciate the above is a lot to go though, but I'd welcome any help and guidance.

    Mo | London | 15/10/2018 | 3

    • Stocks and Shares ISA
    • Shares
    • Online Investment Platforms
    • Funds
    • Other
    Holly Mackay's Response

  • The recent Metro article which Holly participated in has really inspired me and made me think that investing in shares is something which I would like to do. Unfortunately I am completely thrown about where to start. I would be grateful for any advice you could pass my way. Realistically, I would only have about 2k to invest, so any tips would be gratefully received.

    Sarah-Jane | London | 12/09/2018 | 3

    • Stocks and Shares ISA
    • Cash
    • Online Investment Platforms
    Holly Mackay's Response

  • Any advice for two young people trying to get themselves a home? My girlfriend and I are saving for a house together. Currently house prices in our area are a ridiculous £300k. The max we can get from banks is about £220k, meaning somehow saving up a whopping £80k deposit. This would take us about 8 years (and house prices are increasing faster than we're saving!) That's not to mention solicitors fees, stamp duty, the cost of moving, furnishing the house, white goods, and any repairs or renovations. It all just seems impossible!!

    Joe | Buckinghamshire | 23/08/2018 | 0

    • Stocks and Shares ISA
    • Lifetime ISA
    • Cash
    Kate Fitzpatrick's Response

  • I have cash saved in ISAs and savings accounts - probably a 30% deposit on a property - first time buyer. I am at least 12 months away from getting a permanent job, so at least 12 months away from buying a property. What can I do with the cash in the meantime? Best just to leave it in cash for now, or invest a portion in stocks and shares ISAs?

    Malti | London | 25/07/2018 | 2

    • Stocks and Shares ISA
    • Lifetime ISA
    • Cash
    Holly Mackay's Response

  • I'm nearly 30 and looking to open a private ready made pension, and also an investment ISA for retirement funds or towards a property, but very unsure what risk level to choose (low to medium, or medium to high)? Any comments or advice welcome.

    Susan | WMD | 24/07/2018 | 1

    • Private Pension
    • Stocks and Shares ISA
    Cherry Reynard's Response

  • Hello Are there any specific pensions you would recommend, with low charges, which I can set up for my 11 yr old son. I am already paying the maximum into a junior isa. AH

    Anita | SXW | 18/06/2018 | 3

    • Private Pension
    • Junior ISA
    Richard Allum, MD, Paraplanners 's Response

  • Can I move an old Child Trust Fund?

    Suzanne | Greater London | 08/05/2018 | 0

    • Junior ISA
    Holly Mackay's Response

  • I would like to open a Junior shares ISA for my Grandson for about £50/month. How do I go about it and can you recommend some reliable companies?

    Roger | Surrey | 26/04/2018 | 2

    • Junior ISA
    • Shares
    Founder and CEO's Response

  • I am in the very lucky position of just having received a gift of £800k which I want to invest for our retirement. My husband and I are in our late 40s and aim to retire in around five years. We have 11 more years of school fees to fund, then hopefully university fees for two after that. I've put together a plan for us - can you have a look and see if it makes sense?

    Fiona | UK | 18/01/2018 | 6

    • Private Pension
    • Stocks and Shares ISA
    • Junior ISA
    • Shares
    • Cash
    • Online Investment Platforms
    Holly Mackay's Response

  • We have four grandchildren (2 English living in UK, and 2 Irish living in Eire). We have decided to start savings plans for their futures. Their ages are 18yrs, 11yrs, 8yrs and 4yrs respectively. My age is 75yrs, and my wife is a little older. What should we do, please?

    John | BKM | 01/01/2018 | 1

    • Junior ISA
    • Lifetime ISA
    • Shares
    • Funds
    Martin's Response

  • Have you a review on Halifax stocks and shares isa

    Moira | LDN | 21/10/2017 | 3

    • Stocks and Shares ISA
    Dr Richard Bradley's Response

  • My mother is 84 and has around £35,000 in cash, realised when she moved to a smaller house. She would like to invest it and draw income that would be slightly higher than the natural yield - say around £2,000. What is the best vehicle for that please?

    Ed | SXE | 18/09/2017 | 4

    • Stocks and Shares ISA
    • Cash
    Danny Cox's Response

  • I have a delightful 12 year old daughter and she has just opened her first bank account. I am dreadful with money but I would like to know what I should teach her so that she does not pick up my bad financial habits. Do you have some top tips of things to teach our children so they are wise and responsible with money please?

    Louise | Greater London | 11/09/2017 | 1

    • Junior ISA
    • Shares
    • Cash
    Lesley James's Response

  • I've got £20,000 from an endowment policy (astonishing, I know), and I'm looking into how best to invest to get a reasonable return without excessive risk. Any thoughts much appreciated!!

    Penny | Peterborough | 09/08/2018 | 1

    • Stocks and Shares ISA
    • Cash
    • Online Investment Platforms
    • Life Insurance
    Danny Cox's Response

  • How much should I insure my life for?

    Femi | Greater London | 07/09/2017 | 0

    • Life Insurance
    Holly Mackay's Response

  • How risky is a Stocks and Shares ISA?

    Alexandra | Greater London | 06/09/2017 | 2

    • Stocks and Shares ISA
    Holly Mackay's Response

  • Should I be even thinking about the stock market?

    Lysa | Greater London | 06/09/2017 | 0

    • Stocks and Shares ISA
    • Shares
    Holly Mackay's Response

  • Pensions vs ISA - which one is best?

    Roderick | Greater London | 06/09/2017 | 0

    • Stocks and Shares ISA
    • Junior ISA
    • Lifetime ISA
    • Pension
    Holly Mackay's Response

  • How much does life insurance cost?

    Christina | Greater London | 06/09/2017 | 0

    • Life Insurance
    Holly Mackay's Response