In 2012 I sent a report to my Australian readers. I alleged that Australian banks and mortgage brokers were engaging in large scale fraud. They’d simply alter people’s loan applications in order to get them past lending standards. It was another sub-prime crisis in the making.
People laughed at me. Then they read my evidence and got worried. In 2018, a Royal Commission confirmed I’d been right. And uncovered a lot more wrongdoing to boot. Including the good old “fees for no service” scandal and charging long deceased people regular fees…
So perhaps I should’ve known better than anyone what the state of the UK financial services industry would be…
I should’ve seen your countless emails coming…
I should’ve known that a central theme of Fortune & Freedom would be how the industry lets people down…
Instead, I was just expecting emails like this one we received:
Twice the city of London screwed my pension with the result that I have a tiny private pension that is less than the state pension.
But it was actually a far broader response we got, as you’re about to see. It turns out that the UK financial services industry is rotten from top to bottom.
Today, I’d like to do two things. Make you realise that, if you’ve been let down, you’re not alone. Far from it. There are many like you, just on our Fortune & Freedom list alone.
We’re still working on how best to actually help you. One thing we cannot do is assist with individual cases. For a long list of reasons, including regulatory ones.
But we can reshape Fortune & Freedom to focus on what’s actually going on in your lives as a group. Tease out the themes, trends and commonalities in your feedback. And then establish how best to help you deal with them in the future.
So, before we dig into just some of the reader mail we’ve received, we’ve got another plea. As some of you already have done, please tell us about your successes by going it alone – leaving the money men and middlemen by the side of the road… thinking and investing for yourself.
How have you fared? [email protected]
And now, for the mailbag. Which kicks off with something a little more light hearted than what’s to come…
Your article starts:
“How many people do you rely on, just to get your hands on your money?”
Did you mean to say:
“How many people do you rely on, just to get THEIR hands on your money?”
Enjoyed the article!
As Nigel explained previously, the financial system doesn’t have your best interests at heart. It has its own best interests at heart. That should be obvious. It’s human nature.
But people presume they’re protected from things like Woodford’s fund collapse and the Equitable Life debacle. They believe the government has their backs to counterweigh the self-interests of those in the financial industry. It doesn’t. More on that below.
The bigger mistake here, in my opinion, is that politicians pretended financial markets are a retirement machine. That you can plough money into and a wonderful retirement will pop out the other end.
But, as anyone who has worked in financial markets will tell you, they thrive on unsuspecting victims and those who don’t pay attention to what’s being done with their money. In other words, those who presume that ploughing money in one end will lead to a gold plated retirement, without needing to understand anything about what happens in between.
That’s why you need to take back control, if you’re going to invest. Only you have the incentive to do the right thing by you. We hope to help you with this. But it’s got to be your journey.
Now, some more reader mail:
I am a great fan of Nigel and for what he has done for this country, as a confirmed cynic I trust him, so I am really excited about this new project. Like Nigel I too have been looking at my pension pot stagnate over the last few years, I am 55 and last year I had 112k in my pot, a year later with contribution of nearly 4k its still at 112k! A friend of mine who has worked for has 350k in his pot, so thats not great for me, but how do i take control of my fund whilst still receiving contributions from my employer?
I own a small rental property mortgage free and that has been a great little earner with income and capital gain, but I have too much cash in the bank, but am unsure what to do with it. Sure i’m aware the stock exchange over the long term always performs in an upward trend but I suspect like a lot of people my age we are risk adverse and do not feel confident trading stocks and shares.
BUT… I need to start doing something, so I look forward to hearing more from you guys
Be careful about that stockmarket assumption, AB. I think Nigel may agree with you that stocks go up in the long run. But I’m not so sure. (There’s no party line at Fortune & Freedom – we’re free to disagree with each other.) I’m worried that stocks don’t always go up in the long run. Just take a look at Japan’s over the last 40 years…
This reader is getting impatient waiting for stocks to go up:
Like anyone else who invested in stock market there has been little or no return in last 5 years
The FTSE100 has gone nowhere in the last 20 years…
But that’s still better than this reader’s experience:
I was one of the first people to invest in ISAS when Nigel Lawson introduced them. I went to one of the most repurtable high-street banks ; and they invested all my hard earned cash in a single, highly reputable, fund. Within six months they went bust, and I lost the lot. (Note: the [fund manager) still continued as before.)
This one trusted the system to deliver returns, for a while:
Many years ago, I invested in a unit trust. After saving for four years, I cashed out with hardly more money than I had put in. There are 14,000 ‘products’ on the market and most of them under-perform the market. I regard all funds as hardly better than a criminal endeavour.
This reader managed to take all three of the hits which many of you emailed in about:
Yes – Pension value dropping buy over 25% in recent years despite pumping more money in. Also Endowment Mortgages some years ago now – scandalous. Also some years ago hidden insurance costs found within monthly mortgage payments that I knew nothing of – should be ashamed of themselves.
The next reader is one of many who explored a key theme of upcoming Fortune & Freedoms.
In the 1980s I was advised by a chap in my bank to invest in the stock market through a unit trust. I was told by him to keep investing the profits buying accumulation units and after five years you will not have to pay any tax when you cash them In.
After seven years I cashed them in and had to pay capital gains tax and corporation tax. Interest rates were very high at the time for savers. I could have left my money in a bank account and done just as good.
My bank was later floated on the stock market. I was given shares in the bank only to find the paper work they gave me and others was worthless and I along with others had to pay a bill to prove these shares belonged to us before we could sell them.
The only way I ever beat the banks was through bricks and mortar.
I’m struggling to come up with an intuitive name for this phenomenon, which so many of you emailed in about. But if you can picture that scene in a horror movie when the door slams shut behind the victim, that’s what I’m talking about. A financial trap laid for you by the government and the industry.
Here’s how it works. The government sets up some sort of financial incentive for you. Usually tax breaks. Then, once you’ve paid a financial advisor an exorbitant fee for reshuffling your finances to take advantage of the new incentive, the door shuts behind you. Your money is stuck inside it.
Suddenly the tax incentive is reduced or disappeared altogether. When you rush to get your money out of the scheme, it is subject to even more fees. Or even a tax penalty. All of this happens slowly, over time, of course
I warned my Australian readers about this trap for years. I told them their version of private pensions were such a trap. And then the door slammed shut behind them when the government made lump sum payouts less tax efficient. The Australian pension industry wanted people to leave their money in their fee collecting funds as long as possible, so it only became tax efficient to withdraw it slowly.
Well, now I’m warning you about the same thing here in the UK. Your ISAs, for just one example, will be on the chopping block someday. I’m convinced of it. First they’ll limit how much of your ISAs you can withdraw. Then they’ll tax ISAs in some way.
The trap hasn’t sprung yet. Well, not for ISAs. But plenty of you emailed in about similar experiences of the past…
I put some money into several private pension in the 1990’s and I got much less than what I put in. I was told that it was because Gordon Brown raided the pensions.
The financial industry is already busy charging tolls on one gate that will soon shut behind dedicated savers and investors:
Dear Nickolai Hubble
Thank you for your new web page on how to help your own finance – I’m a very big follower and admirer of Nigel Farage – I’m a member of the Brexit party ,and got to an age of pension selection – I should have picked up a private pension, that matured 1st September 2020 – (6 weeks back).
However because I wanted full amount -I have to be interviewed by Financial Advisor FCA approved . this apparently is the law since 2016 – I can see why, due to unscrupulous persons scamming pension pots , from persons about to retire.
However – These unscrupulous persons, have been substituted by FCA approved Advisors – Who have jumped on the band wagon , and they are doing the scamming now.
In my case £ – less tax £ I should be able to pick up – but because FCA want 5-7% I will have to pay them £ – £ just for their advice – That I Didn’t ask for . Or wasn’t in place ,when I took out the policy
Please look at the correspondence to my MP ,
I’ve not agreed to have this FCA interview as yet because -Its so unfair I should have to pay, just to gain my money I’ve waited 40 years for.
please if you want print in the web page any solutions (Without the pension amount please )
You’re not the only one DL:
I had to use an IFA to transfer my DB pension to a SIPP, the prices that they charge are outrageous, as are the ongoing charges for advice. I now have a simple one year pension review with an IFA of by bespoke ethical scheme, managed by Quilter, it cost me £500, another IFA wanted over £4k pa for just this, a 3 hour job.
IFA’s generally look after their wealth first, as long as they don’t break the rules they can charge you whatever they like – and most people are too timid or intimidated to question this or walk away. It’s like a slave master relationship, where people are too embarrassed to go up against their IFA.
Yes .need my pension . Been told need advice off financial advisor . Thinking to cost 5 to 7% of my pension. £1700 just to get my pension forms rubber stamped from advisor. I wait 40 years they take £1700 for advice I don’t want or need.
As I mentioned, we’ll be exploring this trap in coming weeks. It’s a bait and switch, I suppose. Can you come up with a better name for it?
Let’s move on to some other stories our readers sent in.
It looks like this reader experienced the dangers of counterparty risk which I discussed in our first emails to you:
Brokers misused my large investments and went bankrupt. FCA not much help.
I mentioned above the mistake of treating financial markets as a retirement machine. Well, that’s the third stage of the retirement scandal.
Stage one was to believe that the government would pay for your retirement with the state pension. But taxpayers couldn’t afford it.
Stage two was to believe that employers would pay for retirements – that companies were a retirement machine, where you could hand them some of your paycheque and then get a retirement at the end. That didn’t work either:
yes you take a pension with a company who then get taken over by another company and the deal they accepted meant i don’t get any more bonuses per year and its to costly to leave. in other words they take my money and i don’t get any interest at all until retirement
But these are three variations of the same lie. That someone else can sort out your retirement for you. No – you need to do it yourself. That’s why we’re launching Fortune & Freedom.
This reader seems to agree with the recent Fortune & Freedoms about banks and negative rates:
Yes, as a boomer I’ve copped the lot (apart from negative interest rates and bail ins – that’s up next). The restitution process is as crooked as the services themselves. [Financial Services] needs root and branch reform – need to rediscover fundamental guiding principles and ensure they permiate the whole system. Wrong doers need to be held accountable, failure should not be rewarded, failures should be allowed to die.
Be careful about “reform”. It’s something politicians do at the bidding of industry – the only interest group which gets represented at the policy making level with lobbyists.
But I do agree something is deeply wrong with the industry. As did this reader:
I feel that the entire system is effectively weaponised against the every-man. Things like KYC and AML for example are held up as a signs of professionalism and security when they actually only achieve the opposite for the ordinary person. The entire system is setup and run to serve only the big players and the counter-parties at the expense of the ordinary person.
The results confirm those beliefs, for this reader at least:
I have in the past 30 years invested 3 times using financial advisors, and each time I have lost money on the investments.
Even when our readers got their investments spot on, the financial industry found a way to muck it up:
In the mid 2000’s I invested in a gold etf. The price of gold went up MUCH further than the return I recieved. Reading the small, small print I noticed that the return was pretty much capped at 20%.. I should have read the small print. I know it is my bad and lesson learnt I guess. Still, since then I have NEVER dealt with again and whilst I am sure they are not quaking in their boots at the loss of my pennies am evangelical with my dislike of them. In an investment the banks/brokers take their cut regardless if the “vehicle” performs. That pisses me off.
We hope you’ve read our report on investing in gold. Doing it via the mainstream financial system is a mistake, in my view. It negates the benefits of owning gold in the first place.
I can share this readers’ frustration myself. I set up accounts for a specific investments, but can’t access them:
The company who has my husband’s SIPP refused to let him invest in many of his chosen funds
I’ve heard of a few narrow escapes like these:
bank. Phoned them to see if the bank was ok in the banking crisis and they said it did not affect them. I felt the person telling me this sounded nervous. I closed my account that day. 6 days later the bank went bust and savers lost every thing.sixth sense save my mothers and fathers life time savings . My Mother had saved all her life as a dying nurse as they were called then. To think she could have lost everything she had worked for because of a dishonest person telling me every thing was ok still gives me nightmares today.
You might have nightmares, but we’re daring to dream of hearing more stories like this. Especially after the last few Fortune & Freedoms which focused on bank risks.
Many of you discovered the hard way that all the government regulation, codes of conduct, ombudsmen and guarantees don’t protect you in the end:
Yes, in 2007 I invested my whole pension pot (84,000+) in a commercial property investment as advised by an FCA. The value went down from the moment I went into it and ended up after 10 years being worth about £30,000. I was able to claim £50k from FSCS about 3 years ago on the basis of mis-selling by the FCA. In total it meant after ten years my pension pot didn’t even match the amount I put in 10 years earlier.
This reader reminds us that the government is always willing to add insult to injury:
Mis sold a pension transfer. Lost my pension and incurred a tax charge from HMRC.
This reader explains the nature of what’s really going on:
I work in the industry and am concerned that the FCA is effectively unaccountable and slow to act when alerted to potential scams and bad practice. The FSCS fees paid by firms is, effectively again, a tax on regulatory failures which is increasingly rapidly every year. The cost of this is of course ultimately borne by the customer.
During the financial crisis of 2008, the Australian financial industry I was busy qualifying for boasted it was nothing like the wild west of the US and UK. The Aussies explained they were better regulated, managed and more ethical.
Then the revelations of the 2018 Royal Commission exposed the Aussie industry as worse than the UK’s. I was in training for my UK qualifications at the time. And our British teacher explained how superior the UK industry is compared to the wild west of the Aussie system…
We should mention that, obviously not all advisors are… well… whatever you want to call it. There are heroes too:
Poor advise on my wife’s final salary pension. Sorted by a good financial advisor, got it reinstated now has a healthy pension for the 14years she was in the job
A few former IFAs are now working at our publishing company. You’ll hear from them in coming weeks.
And it’ll be better than what this fellow experienced:
I placed my retirement account with a advisor. After a year I found out he had done nothing with it at all. Just parked it in cash.
This reader sums up the state of the Fortune & Freedom inbox right now:
I have had so many bad experiences with the financial industry in my lifetime that I would need a year to write them all down….
Still, we need more of your stories of success too. When you decided on a DIY approach, how did it go?
Thanks again from Nigel and I for all the time so many of you have taken to take our questionnaire and send us your experiences. It has forced us to adjust our plans for Fortune & Freedom.
Editor, Fortune & Freedom