Common Financial Scams and how to avoid them

The world of financial products can seem immense and it can be difficult to know good products and companies from bad. It is true that many schemes can be beneficial and give good returns or offer security and protection from the pitfalls of life. But they can also be incredibly complex. We hear of many fraudsters with fake businesses and less than scrupulous companies over-charging for products that never give back all they said they would. With so many companies on the market today, what are the top products to watch out for and what can you do ensure you are not being ripped off?

Funeral plans

The pre-paid funeral plan market has grown substantially in the last 10-15 years and is said to be worth around £3.3 billion in the UK. It offers people the chance to determine the type of funeral they want in advance and to know that they won’t be a financial burden to loved ones. However there has been controversy over sales practices, unreasonably high fees and a lack of clarity as to where money is been kept. After a spate of bad reports, investigations were undertaken and finally the rules are changing. Thankfully it is easy to avoid bad companies; funeral plans are regulated by an organization called the Funeral Planning Authority (FPA).

There are decent products and good companies that genuinely offer the benefits and peace of mind that have drawn in so many customers to purchase plans. However, you need to ensure you know exactly what a plan covers and what it doesn’t. It’s important to know if the plan will cover any inflationary costs too and critically ensure your provider is registered with the Funeral Planning Authority.

Bitcoins and cryptocurrency

Bitcoins and cryptocurrency mean big money at the minute and if you’re lucky enough to be able to invest there is good money to be made. That said there are also many, many scams at the minute including those with supposed celebrity endorsements to try to get you to part with your money. If you’re interested in Bitcoins or cryptocurrency, look for a company like bitcoin superstar betrug and do your research first to know exactly what you are getting yourself involved with.

Payment Protection Insurance

PPI has developed a bad reputation, but it is not necessarily a bad product in itself. For many, it provides the security of protecting yourself from spiralling debts in the face of losing your job or becoming upwell whilst still owing money to mortgage, loan or credit card companies. The issue with PPI is that this product was famously mis-sold by many reputable financial institutions. Customers didn’t know what was covered or were falsely told it was compulsory or didn’t even know they were paying for it.

For some people, perhaps with dependents, this insurance may offer a worthwhile safety net. Reputable financial institutions may have learned from the scandal, but it you are purchasing this product you need to understand who you are buying it from, what their background is, and exactly what is covered. Evaluate whether it is really worth it for you. It is often criticised as being incredibly expensive. You may want to first check if you have any cover through your employment and consider if you can accrue some fallback savings as an alternative. Don’t sign up for it simply because someone tells you you should.

Equity Release

Equity release is a loan given on the basis of some capital value or asset you own, mostly commonly your home. This type allows people over 55 to receive some of the value of their home as a one-off payment or in regular instalments. Of course, this will need to be re-paid with interest. This is usually done when the last surviving homeowner dies or moves out.

There have been claims of companies bombarding older customers and luring them with promises of an easy, immediate cash solution without making clear the full costs and complications. It is another expensive product, with high repayment charges, especially if you decide to repay early. If you feel this product could be for you, you should make sure you think it through with a long term perspective – what you will do if your circumstances change and how important it is to you to leave an inheritance? Many of the complaints about these products have come from relatives who have been left with debts. Ideally, you should get advice from an independent professional and only ever buy products from member companies of the Equity Release Council.

Shares and investments

Stocks and shares can be a good way of getting better returns on your savings than in banks. But again, independent financial advise is recommended. Scams these days have becoming much more sophisticated. Bogus companies advertise online and in print, even offer free gifts and often carefully target potential victims. They claim to be selling shares in any of a number of different business ventures such as land, overseas properties, cryptocurrencies and many others.

This is not an area to go into lightly no matter how convincing or urgent the seller sounds. Be wary of anyone that cold contacts you, even more so when they tell you need to invest quickly. Take advice to be sure the investment is not high-risk or worthless and be sure the company and product are real. Only deal with FCA registered companies and stick with regulated products (these are listed on the FCA website). You know the saving, if it sounds too good to be true, it usually is.

When you opt to take up financial products, it should be because you have decided it is something you want or need. Don’t be persuaded by unsolicited calls or emails. In fact, it’s good to be suspicious of anyone that contacts you without you asking them to. Never sign up for anything immediately. Go away and take your time to think it over – if it’s a limited time deal, be especially suspicious. Always check out any official bodies regulating the product. If it’s an expensive product or involves a significant amount of money it may well be worth getting independent advice. With the right advice and research, you can make the most of products that genuine suit you and avoid those that don’t.

*This is a collaborative post*