Financial services? It’s a scandal

I've been writing about money for 12 years now, and I've finally settled on with this shocking conclusion.

Personal finance? It's just one damn scandal after another.

My money career kicked off with the pensions mis-selling scandal, which was triggered by commission-hungry salesmen encouraging people to quit their company scheme in favor of inferior personal pensions.

Since then I've seen mis-selling scandals over FSAVCs, mortgage endowments, precipice bonds, split capital investment trusts and oops, I nearly forgot payment protection insurance (PPI). Plus of course Equitable Life, which is still rumbling on years later.

I'm sure I've missed a host of scandals and near-misses in that list. It's so hard to keep track.

And that's not to mention the constant stream of complaints about rip-off bank charges, hidden credit card fees, umpteen other tricks and the small matter of a global recession caused by greed-addled bankers.

I won't go on.

Crooks and cons.

Actually, I will go on, because there are also the out-and-out crooks, the con-artists and swindlers masquerading as brokers or advisers who fraudulently help themselves to their clients' money.

This week it emerged that the number of rogue mortgage, investment and insurance advisers banned by the FSA rose 50% last year. Oh joy.

But I'm actually less worried about the blatant criminality, because every profession will throw up its share of villains, what concerns me is that so many dodgy dealings are institutionalised.

The companies behind all these scandals form a rollcall of the biggest and proudest names in the UK financial services industry.

It's the banks, stupid.

Starting, of course, with the banks. Pensions, endowments, PPI, you name it, they have mis-sold it.

You won't be surprised to hear that the Financial Ombudsman Service is now dealing with a record number of complaints, or that the big banks are the main culprits, drawing six out of 10 complaints.

Mortgage and banking disputes tripled and insurance disputes doubled in the 2007/08 financial year. Current account charge complaints rose tenfold and payment protection insurance (PPI) cases rose sixfold (the Ombudsman gets over 500 PPI complaints a week).

Overall, the Ombudsman fielded a record 794,648 inquiries of which one in six, 123,089, turned into cases.

That's up 30% in one year. And was despite a 70% fall in endowment cases, which have mostly worked through the system.

Next came life insurance and investment product providers (14%), general insurance providers (11%) and building societies (4%).

At least financial advisers have cleaned up their act, or rather, had it cleaned up for them by rigorous FSA action.

IFAs attracted just 4% of complaints, down two-thirds, largely because many mortgage endowment complaints have now time expired. General insurance intermediaries (3%) and mortgage intermediaries (2%) fared even better.

Save yourselves!

You could be forgiven for thinking that anybody who buys a personal finance product has willingly leapt into a sea of sharks.

It is a scandal, and there will be another one along in a minute, don't you worry. No end of regulation seems able to stop it, so what do you do to protect yourself?

10 rules for survival

Here are my 10 rules for survival.

1. Trust nobody. Not the nice lady at the bank, nor the friendly adviser who can't advise across the whole market, but tells you that doesn't matter because he has the ideal product for you.
2. Don't buy any financial product you don't understand, or anything that is too clever for its own good. That applies to most structured investment products.
3. Don't buy anything that is too good to be true. Precipice bonds attracted older people because they guaranteed income up to 9% a year. How could they promise this? By raiding your capital to cover any shortfall.
4. When you hear the word "safe", be afraid, very afraid. Splits were safe. Standard Life's Pension Sterling fund was safe. Capital secured products sold by NDFA, Arc, Meteor and DRL were safe, until Lehman Brothers, which issued them, collapsed.
5. Avoid the banks. OK, you can use them for your current account, or maybe a market-beating mortgage or savings account, but beware their investment funds or insurance policies.
6. Consider going it alone. But only if you really understand the risks. When I set up my first personal pension in 1999 I didn't want to line any salesman's pockets. So I went to Equitable Life. Doh!
7. Be honest. They say you can't fool an honest man. Many of the mortgage brokers reported to the FSA for fraud were inflating their clients' income to secure a larger mortgage. Presumably, with their client's full knowledge and support.
8. Spread your risk. With dodgy doings so widespread, don't put all your eggs in one basket. They might all get fried.
9. Seek redress. For every scandal, there is a pressure group. The battle against PPI and bank charges have been led by media and online campaigns. Lehman Brothers victims have their own campaign, SPIRIT, which you can join by emailing Peter Howard at spiritedawaybylehmans@hotmail.com. Alternatively, go to the Financial Services Ombudsman.
10. Keep the faith. Not everybody in the financial services industry is a lying crook looking to swindle you out of your hard-earned savings. Although at times it certainly seems that way...