Simon Read: We're all taking big risks dealing with financial firms

 

Risk is all around if you're an investor. You know that if you want to chase higher returns, you have to accept greater risks. But the Financial Services Authority (FSA) warned this week that, beyond such planned risk-taking, consumers are facing a barrage of fresh risk from unsuitable and overly complex financial products.

In its Retail Conduct Risk Outlook, the City watchdog named the types of investment products that offer the greatest prospect of consumer detriment over the next year – and there are lots of them.

Many are areas we've covered in these pages in recent months so shouldn't come as too much of a surprise to regular readers. They include structured products, exchange-traded funds, absolute-return funds and traded life insurance policies.

As I've discovered when writing about many of these, it's often difficult to actually describe how they work. My view is that if you can't understand something, you shouldn't invest in it.

But the FSA has also expressed concerns about more mainstream products, such as insurance, banking, pension and mortgages. The key concern seems to be that companies may be flogging the wrong products to people.

The watchdog said the danger is that in the chase for profits, some firms are "designing products for maximum profit but little benefit to customers".

Martin Wheatley, the FSA's managing director, said: "Consumers rely on financial firms and their products to provide them with vital services – literally the means to run their lives. They need to be able to trust that the products they buy work for them and that they are getting a fair deal."

Fairness and trust are not normally words you associate with financial services anymore. But I would, nevertheless, echo Wheatley's words in calling for them. And I'm hopeful that financial firms will prove to be fairer in the future and rebuild some of the trust they've lost with us.

At the very least I hope they heed the FSA's warning and think more carefully about the kind of deals they offer consumers.

At the forefront of all should be the question of whether they offer a benefit to us.

At present, sadly, the question at many finance companies is much more likely to be "how much profit can we make out of the suckers?".

We know that being in debt can be a depressing experience, so it's discouraging to read in the Consumer Credit Counselling Service's (CCCS) annual report published this week that a quarter of people in debt don't share their troubles with friends or family. The old adage about a trouble shared being a trouble halved, could hardly be more apposite.

It's understandable that people don't want to discuss their debt woes. They may be embarrassed about it, or worried about being judged for their impecuniosity. But I know from experience that admitting you're in financial trouble is the first step towards solving the problem.

The CCCS figures also revealed that 45 per cent of people delayed seeking advice for more than a year after beginning to worry they had a debt problem. Put this together with the fact that a good many of them would have carried the worry of the debt burden alone, and there's a troublesome picture emerging.

There have been many tragic suicides of people who have felt unable to cope with the worry of debt. But if they had been able to talk about their problems, who knows what kind of future such folk may have had?

That's why we've got to stop being worried about debt and, instead, start finding ways to deal with it. As well as the CCCS, other debt charities and organisations – such as National Debtline, Credit Action and Citizens Advice Bureaux – are on hand to help.

All of them can help those in debt find ways to put their finances back on track, but reaching out to friends and family could be the best way to cope with the deep anxiety that money worries cause.

The issue of fuel poverty has dominated many of the articles I've written for this paper recently. Personally, I think it's a scandal that millions of people are forced to choose between heating and eating because they can't afford to pay their rising gas and electricity bills.

And the fact that thousands of people die every year because they can't afford to adequately heat their homes should shame us all. The number of excess winter deaths because of fuel poverty is between 3,000 and 8,000, depending whose figures you accept. But even one death is unacceptable.

So I was eager to read Professor John Hills' government-commissioned fuel poverty report this week. He has proposed changing the way we define it.

Currently, the definition of a household in fuel poverty is one which spends more than 10 per cent of its income on energy.

The new measure puts the focus on people with low incomes and high energy costs. This seems eminently sensible as, at a stroke, it will stop the nonsense of wealthy people with massive homes and consequently high fuel bills, being included.

But the more chilling message in Hills' report is that official plans to fight fuel poverty are failing.

I hope ministers act quickly to change this.

Thank you to the more than 3,500 readers who entered our Savvy Shoppers competition. The five winners of £1,000 Argos vouchers will be notified next week and the results published online at independent.co.uk. Now I know there's an appetite for such competitions, I'll try and organise more!

s.read@independent.co.uk

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