Scams are nothing new. From the Nigerian Prince who needs our help transferring money to the glut of fake goods sold as genuine articles, scams are here to stay. But forget the cheap Louis Vuitton knock-offs – the new battleground is UK savers.
UK savers are perfect targets. They have money readily available (at times tens of thousands of pounds) and are desperate to beat the paltry 1% that most big banks are touting. Over the last few years, savers chasing the best available rates have also become used to a lot of new names popping up in best buy tables. These new savings-focused banks include Charter Savings Bank and even Al Rayan Bank, neither of which are household names. Combined, these factors have helped to make savers deeply vulnerable targets.
Just a quick Google search of some of these new savings banks returns a number of Google advertisements offering what appear to be compelling savings alternatives. These alternatives may not be scams, but the way they go about marketing their investment products leaves a lot to be desired.
So what causes me concern?
Take a look at the below website. The headline reads 'government backed bond'. Read on, and the claim is adjusted to read 'government backed sector bond'. It’s a nonsensical claim. After all, just what is a non-government backed sector? The use of the term is intended to signify low risk. It sounds as though the government backs your money.
The same website boldly highlights its TrustPilot customer rating. It’s no secret that consumers look to review sites to help inform their buying decisions, especially when they don’t know much about a firm or product.
A quick Google for ‘securedbonds.co.uk reviews’ does indeed bring up a TrustPilot page with one review that gives this company a one star rating. Hardly a ringing endorsement, and not in line with the rating they claim on their website.
This isn’t the only example out there. Another website claiming to offer a 'savings alternative' uses the following wording, 'In relation to the FSCS, this is an underwritten guarantee in relation to bank deposits (£85,000) and unsuitable investments from brokers (£50,000).' At no point does it make clear if the 'savings alternative' they’re offering is FSCS protected. The answer is that it most definitely is not.
Why does this matter?
While we’ve come to expect estate agents to enthusiastically call that pokey second bedroom a compact child friendly room, we must expect more from those engaged in selling and marketing financial products. Anything that could mislead consumers into a high risk and illiquid twenty thousand pound investment makes my blood boil.
And the whole financial services industry should be concerned. The much-hyped Open Banking is just around the corner. Open Banking promises consumers a new vision of how they can better take control of their finances. And yet, this big idea relies wholly on trust, the trust that is being eroded everyday that we don’t put an end to the dubious selling of financial products.
So, who should protect us?
There’s little doubt in my mind that Google must do a better job of vetting these ads. UK consumers must also do a better job of sounding the alarm and reporting things that don’t appear kosher.
But please don’t mistake this plea for a lefty yearning for some sort of nanny state on steroids. I believe that sophisticated investors should be able to make all or nothing bets. But I also believe that the playing field should be fair, and that downplaying the risks involved is a red line that robs consumers of the ability to make informed decisions. UK savers should be very wary.
Mike Fotis is the founder of Smart Money People and a former financial services management consultant.