Who needs to change–the financial industry or their young consumers?

Iona Bain


That’s right – why think about tomorrow when you can live for today?

Not every young person is enamoured with this type of Twitter speak, judging by straw polls of my friends in recent years, but it is nonetheless readily associated with the younger generation. It’s this prevailing sentiment that makes it so hard to market pensions, savings, insurance and other financial products to young people, who allegedly can’t look past the end of their beer glass, let alone towards middle age, or retirement. As for protecting against the loss of income or serious illness? Neither seems such a pernicious threat when us youngsters can routinely survive the most biblical of benders.

Yet waves of research, and the financial industry’s own plucky initiatives, suggest the financial industry are sticking with the young demographic. It seems that we are  not only accustomed to saving – we positively champion it.

Surprisingly, we are even more diligent than babyboomers, who should know really better given their proclivity to stash away their fortunes in promising assets such as homes.

Firstly, there is a new report from online savings provider GE Capital Direct which found that 18-24 year olds save nearly a third of their income, the highest out of any age group. 

They are closely followed by 25-34 year olds who save at least a fifth (22%) of their salary each month. Compare that to so-called Gen-Xers, aged between 45-54 years old, who save a tenth (12%) of their monthly income. However, the research shows that young people are inclined to use their savings for aspirational experiences, even though they are keen to get on the property ladder.

Secondly, I attended an event this week which explored why young people are apathetic about income protection, critical protection and other insurance products which give you a safety net should you get ill or lose your job.

Payment protection insurance has given this type of product a very bad name, but I have to say that the industry’s short-sighted approach to generating more sales has been just as much of a thorn in their side. 

Don’t get me wrong, protection can be a thoroughly worthwhile product, particularly if you have dependants. It can be even be worth considering if you’re single and can’t fall back on friends and family should the worst happen.

But I was dismayed to hear that most people, surveyed for the 2014 Protection Syndicate report, said they received zero contact or additional benefits from their insurer since taking out a protection product. When customers did hear from their provider, they reported cold calls from salespeople peddling a new product or pushing for premium  renewal. That is just not good enough.

But this applies right across the board, from insurers to banks. Trust in the sector has reached its lowest ever ebb, and it will take a full blown charm offensive to win back consumers. That means offering tangible benefits today, rather than the promise of security tomorrow.

Right now, young people are minded to squirrel their funds away in short term cash accounts rather than place faith in more complicated financial products, with a little set aside for pensions if they get to a more comfortable financial scenario.

The problem with all this is that the financial industry is still geared towards selling a limited range of products, many of them rooted in far-off life stages, and that’s where  its engagement with young people unravels. We are price-conscious, discerning and aspirational. We recognise the limitations on our ability to live an asset-rich, superficially prosperous life, especially since the downturn took hold. But it does not stop us from trying to retain our dignity, our sense of identity and status, through discerning choices about where we shop, store our money and access our primary sources of information. In other words, we expect a more dynamic, flexible and service-based financial industry.

And we’re just not getting it.

No wonder many of us are adopting the ‘carpe diem’ adage, albeit in a new guise….

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Filed under Consumer Affairs, Economy, Personal Finance, Savings Accounts

Britain’s phoney war between the generations–and a positive new year message for young people!

happy 2014 readers! don’t let the hoary old debate about intergenerational fairness get you down – or lead you down a blind alley. Here’s why we need to end the blame game and take a more productive approach


Britain appears to be peaceful and harmonious society, right? Wrong. In case you hadn’t noticed, we are in the midst of a new cold war. Now the frostiness between Russia and America has mostly thawed, new battle lines are opening up, right here UK on soil. The dispute is not between races, religions, communities or political factions. It’s not happening on the streets, but unfolding on our televisions, in our newspapers and on our radios. It is not so much civil as civilised unrest, with an intellectual façade that belies its tawdry and unedifying nature.

It is the intergenerational war and the sooner it is over, the better – if anybody ever really believed in it in the first place.

The latest dispatch in this phoney conflict came to me via LBC radio today as I was driving in my car. I was told, quite confidently, that the government’s economic priorities are being skewed well and truly towards the older generation. Why? Because David Cameron has promised to protect the value of pensions against corrosive inflation in a so-called “triple lock”, thus guaranteeing votes from older, more active voters come election day.

LBC presenter Emma Bartlett said most young people probably won’t enjoy the same benefits that their parents will have – free bus passes, free TV licenses – presumably because the welfare pot will have been so heavily raided by short-termist politicians, no money will be left to help us when we eventually retire. Right off the bat, any thoughtful listener would question such a prediction without any supporting evidence.

But the argument continued. Those same young people who are suffering the most right now may be the ones who have to “pay” for the retirement of those who’ve had it all, thanks to huge gains on property, cushy welfare, gold-plated pensions. Older people who’ve borne the brunt of Q.E. and low interest rates would have reason to take issue with that statement. And what form this one-sided distribution would take remains unclear (higher taxes? less spending on young people, whatever that means?)

The detail doesn’t really matter. We should be rising up like Peter Finch in the classic movie Network. Surely we should be mad, and not able to take it anymore?

Mind you, the 40 somethings will be joining us! Yes, Sarah Vine (columnist for the Daily Mail and wife of Michael Gove) joined the fray by saying it was HER generation that was hard done by, struggling in two income households to pay off neverending mortgages while the babyboomers laugh all the way to the bank. She does graciously acknowledge the pickle us young folks are in, but her column is symptomatic of a bitter mentality against those who led a so-called “charmed life”.

Does all this mean that we have to get out and vote for another party that truly represents ‘young people’s interests’? And presumably, so this flawed rationale dictates, any decisions made for our benefit must also be at the expense of older people?

If that sounds both impossible and undesirable to anyone (and it should do), there’s good news – you don’t have to base your election loyalty on pensions. To do so would, in fact, be a foolish mistake. No party has the silver bullet for our pension woes. We’re all living longer, we will have to save more and the government does not have endless funds for anything anymore after funds were pushed to breaking point in recent years. The Conservatives, Labour, the Liberal Democrats, the Monster Raving Loony Party – none of them, no matter what they say, will magically alter the economic balance in our favour so we have jam today and jam tomorrow.

Fortunately for all of us, state pensions will always matter to politicians, as it is one of the few areas of life over which have any meaningful control. That means we should all benefit from the heated political climate that ensures pensions remains a time-honoured shibboleth (if we don’t die before pension age, of course – fingers crossed on that front).

However, the state pension age has and always will be a rather limited form of intervention.

Do not get me wrong. I do not, under any circumstances, subscribe to Russell Brand’s philosophy (for want of a better word) that there is no reason to vote, as all parties will act the same. But we should not be muddled in what we communicate to those in power. How can we get anyone to listen to us if we do not know what we really want and how we want to get it? Suggesting that the protection of pensions is not worthwhile is a dangerous game to play unless you have a meaningful programme of alternative improvements to young prospects in mind – ones that actually require the reallocation of precious funds.

Personally, I believe it is the toxic housing situation, as well as the moral paucity in corporations which drive down tax receipts and the quality of workers’ lives, which needs serious political consideration. We need to pick our battles more astutely.

This debate does not have to become fraught with politics, based on false choices between “us” and “them”. Nobody, including Ms Bartlett, has some privileged insight into the future. To speak about the economic situation for us 40 years hence based purely on the dominant themes today – diminishing welfare resources, hard choices, intergenerational fairness – is presumptuous in the extreme. Who knows where we’ll all be, both in body and spirit, in another 40 – 50 years time?

In the meantime, let’s do all we can to counteract the insipid negativity surrounding young people’s future. A recent poll by the Princes Trust found that three quarters of a million in this age group potentially feel “they have nothing to live for”. No wonder, when young people are told their destinies stand or fall on the smallest decisions made by politicians today. Find my previous blog about the need for positivity here.

I have been asked on several occasions to pose as an angry young person who is bitter about the older generation on TV and radio since I started my blog, but I’ve declined. I believe that would both misrepresent my generation and send out the wrong message about the kind of attitudes necessary for survival. I was even approached by a think-tank to spearhead a campaign to allocate more spending for young people, which would necessitate the sacrifice of so-called “optional” benefits for the old.

Had no-one read my blog over a year ago, when I discussed the intergenerational gap just as it was rearing its ugly head? The whole idea was unhelpful and false then, but at least it was new and interesting. Now, it’s old and boring. Let’s hope that, just as our generation finds cold war politics of the 1960s strange and foreign, our own children will look back with surprise and distaste that anyone engaged in such useless resentment.



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Should everyone really get their pension at the same time?


Many youngsters today will have no choice but to work longer and retire later. That will be the inevitable upshot of this year’s Autumn Statement, which revealed plans to place the state pension age under constant review amid curbs on government spending and predictions of rising life expectancy over the next four decades.

But just how many Scots will live long enough to see the benefit of their pension contributions? That is the question on SNP and Labour lips, as they wonder whether Westminster’s push-back on the state retirement age will cause workers in poor health to lose out.

This crucial turning point in our lives has already been raised to the age of 66 from 2020 and 67 from 2036, allowing the Treasury to snip £100 billion off the welfare budget over the next 23 years.

However, a new principle underpinning future reviews of the state pension age will determine that workers must spend no more than one third of their adult life receiving this state handout.

The Office for National Statistics estimates that life expectancy will reach 83.4 years for men and 87 years for women by 2035.

So the warning came loud and clear from George Osborne; expect to see a new state pension age of 68 by the mid-2030s, ten years earlier than previously proposed, with a further rise to 69 expected by the late 2040s.

That one-size-fits-all approach has been branded “regressive and unfair” by one Labour peer, who joined calls for the state pension to be doled out according to region and even occupation.  

In a recent debate on the Pensions Bill in the House of Lords, Baroness Patricia Hollis of Heigham said: “Every year that we raise the state pension age is deeply unfair on those who have had hard lives. They start work five years earlier than those who enjoy higher education, and they can expect 10 to 15 years less of overall life expectancy and of healthy life expectancy. By raising the state retirement age, we eat into and reduce their few healthy retirement years even further, all to subsidise the pensions of people such as me.”

Her comments were echoed by Roderick Campbell, the SNP MSP for North East Fife, who described the move towards a state pension age of 67 as “too rapid”.

He added: “The Chancellor has shown he is clearly unaware of the social disparities not just throughout the UK, but in Scotland itself. With lower life expectancy in Scotland, the Chancellor will have more people working for longer, but being able to reclaim very little of their pension.”

Mr Campbell also pointed to the Scottish Government’s recently published blueprint for independence, which could pave the way for an autonomous commission on a tailored pension age for Scotland.

Would that make retiring in an independent Scotland a “more appealing prospect” than in the rest of the country? Chris Leitch, head of employment at Scottish law firm Tods Murray Solicitors, seems to think so. But should Scottish independence fail to materialise, Mr Leitch urged workers to make their own plans if they wish to get the most out of their retirement – however long it lasts.

He added: “The Chancellor’s Autumn Statement means that individuals who want to retire earlier than the state retiring age will have to make their own pension provisions and for longer. This has always been true for most, given the generally low levels of state pensions anyway.”

The independent pensions consultant Ros Altman also warned that rises in the state pension age will prove to be unavoidable, but offered hard-pressed workers of the future a silver lining. “Given that work starts at later ages than in the past too, that is not such a bad thing. When work started at age 15, people had worked for 50 years by age 65. For those who go on to higher education, starting work at age 21 or 22 means they will have worked for 43 or 44 years by age 65.”

Ailing savers who need to make the most of their retirement should investigate enhanced annuities if they have saved into a defined contribution pension.

This product will offer a far better annual income than a standard annuity for those who need all the benefits they can get.

Sadly, even those who avail themselves of the so-called “open market option” and shop around to get the best deal could be navigating a minefield, as an exposé by the Financial Services Consumer Panel recently found. Be aware that going down the “non-advised route”, i.e. calling upon your insurance company or an annuity broker to help you, comes with an unclear cost and you will not be able to claim compensation or switch to another annuity should you make the wrong choice. If in doubt, consult an independent financial adviser, who is accountable, can lay out the charges and track down the best annuity for you.   

A shorter version of this article appeared in the Herald last month – click here to read more


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Filed under Economy, Pensions & Retirement, Politics

Are you worrying about a New Year debt hangover? If so, read on…

Herald Scotland


A worrying new survey has found the majority of Scots, 55%, are getting used to living beyond their means, typically spending £119 that they do not have each month. Over a third now view their credit cards and overdrafts as mere extensions of their bank balance and 12% do not put any money away for a rainy day.

A key driver for overspending is widespread frustration with stagnant wage packets, with a third of respondents saying they did not earn enough money to fund extravagant spending.

Some 15% of respondents also admitted to Christmas pressure, saying they were anxious to appear more affluent than they really were, according to the survey conducted for Aviva.

Still of Isla Fisher in Confessions of a Shopaholic (2009)

That motive is understandably strong among families, as a ­quarter stretch their finances to ensure their children do not go without.

Many suspect that their bad habits could lead to disaster, yet 19% are not prepared to change their lifestyle to reflect their financial situation, however strained it may be.

Tim Orton, of Aviva UK Pension & Investments, said: “Money has been tight but worryingly, rather than cutting back, it seems there are some who are continuing to live way beyond their means.”

According to an HSBC survey, the average household bill for Christmas will fall by 7% this year, but will still hit could £488.

Only 15% of us have a festive budget and stick to it, while 58% set a budget but don’t stick to it, 27% set no limit and 22% will have to borrow to fund it all – up from 17% last year.

The 37% of Brits who rely on credit cards or other borrowing to cover the cost of Christmas take on average three months and six days to pay off their festive spending, according to a survey by website Gocompare.com. A recent Money Advice Service survey found that more than a third of Britons do stretch themselves financially over Christmas and one in 10 adults are still paying for Christmas 2012.

As many as 8% of adults in the UK opted to use a payday loan last December – could that figure be even higher this year? John Hall of the insolvency accoutants’ group R3 notes: “Payday loan take-up has increased in part due to the clever marketing campaigns of the big payday lenders.”

Stuart Carmichael at Debt Support Trust in Glasgow said: “People will tell us that they felt obligated to buy their family and friends a present at this time of year, even if that means using credit. Payday loans must be repaid on time, otherwise the debt will accrue additional interest. It’s a problem which often spirals out of control.”

But as this controversial market maintains its hold over financially troubled Scots, plenty of other services are opening up to offer a more affordable lifeline at this expensive time of year.

Traditional credit unions are now aiming to compete with shrewd web-based lenders, with My Community Bank becoming the first to offer an online service for both borrowers and savers.

Borrowing £500 over 30 days from My Community Bank would cos just £11.01, compared to £122.70 from QuickQuid, £125 from Zebit and £150 at Wonga.

However, My Community Bank is seeking to break the cycle of short-term borrowing among its users by stipulating a minimum period of six months, though it does allow these to be repaid early without penalty.

Another innovative business seeking to change borrowing behaviour for the better is Quidcycle. Set up by former financial adviser Frank Mukahanana, the service is effectively a peer-to-peer lending scheme but with a twist; families who have gone through the debt consolidation and repayment programme will be the ones lending money to those starting out on the scheme – once they have paid off their debts and attained financial ­security, that is.

According to Mr Mukahanana, a typical household with £20,000 worth of debt will see repayments reduced from 19% to 12%, with additional cash incentives of 4% offered if they keep up repayments and agree to receive financial education online.

That could mean that they will eventually only have to pay £4000-£5000 back.

In time, they also get the opportunity to earn 4% to 6% interest by lending to people starting on the debt elimination programme.

Alternatively, drawing on family or friends for financial help may not be as risky as is often portrayed, says Ronnie Ludwig, private specialist at Scottish accountancy firm Saffrey Champness. He says: “Whether a borrower or a lender, you could save yourself thousands of pounds by ‘doing it yourself’.

“Obviously, there has to be a lot of trust involved between the two parties and it is not for complete strangers to become involved in. But friends and family members who know each other well could do a lot worse than help each other out so both could benefit.”

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Filed under Consumer Affairs, Loans, Payday loans, Personal Finance, Shopping

The REAL impact of London’s housing crisis on young workers–and our economy

Young workers could leave London in their droves due to its housing crisis – but this situation might present a silver lining to other regions in the UK

iona bain

Recently, a Panorama programme and spate of new statistics were confirming what all of us already knew – our housing market is the dictionary definition of dysfunctional, and London’s property chain is pretty much falling apart.

Tell me something new, I hear you cry. Well, looking at this from a 25 year old’s perspective, it’s clear that we have all underestimated the impact that this housing crisis will have on London’s young workers and, in turn, the city’s economy. And before you say this analysis excludes the rest of the country, let me reassure you that this could well restore the economic vitality that has been missing from so many areas for so long.

To the awful disadvantage of many regions, many centres of opportunity now reside in the capital, based in a variety of exciting and high-prestige professions.

This treasure trove of opportunity has naturally drawn graduates and young workers from all over the country (myself included), who do not see a bright future in their home towns and regions.

But this is a two way street. London’s businesses need us as much as we need them. And we are increasingly horrified at the price we have to pay to live in the capital. Squalid living conditions, a tiny disposable income and no hope of ever owning a home. No wonder many of us would rather go back home, live with the family, even switch careers to avoid that dreary fate.

So the pipeline of talent narrows. A skills shortage opens up. Only those who can get help from their parents, either through a deposit or living in a London-based family home, will fill the positions. Young people from all kinds of backgrounds who could inject fresh, diverse thinking into businesses disappear from view. Big business gets hooked on cheap foreign labour. A lovely Polish girl working at my local branch of a big high street shop tells me she cannot visit her mum back home because her boss won’t let her take a day off. Young British workers just won’t stand for this.

But if we start to desert the capital, so will many companies. Some will go abroad, which would be a blow to our overall economy, but many could follow us back into various corners of the country. Manchester has already overtaken London as Britain’s most vibrant urban economy due to an influx of young talent, according to Experian.

As the capital’s housing crisis continues to escalate, expect more cities to leapfrog London in that index. You read it here first!

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Filed under Economy, Employment, First-time buyers

Why younger workers (and our economy) would benefit from flexible working

by iona bain

It may have only been a year ago but, for many people, the London Olympics seems like a dim and distant dream. But will the notion of flexible working, which briefly flourished during this period, live longer in the memory?

A survey carried out by the Institute of Leadership Management last year indicated that many companies in the capital switched to a more flexible working model for employees during the Games. This was partly because of hysterical but ultimately unfounded predictions that the Olympics would turn ordinary life in central London upside down, making it near-impossible to travel in and out of the capital.

       Workin’ 9 to 5…with Dolly Parton et al


The need for flexible working may have been dramatically overstated prior to the Games. But all the doom-mongering actually did us a favour.

Younger workers often have to live in expensive cities and commuter towns. They move away from home to find the right jobs, often giving up the chance to buy their own home in cheaper parts of the UK in the process. They get trapped in the renting vortex, their disposable income chewed up by high bills and travel expenses.

All so they can travel into a central office, sit at a computer and make calls all day long. No wonder that all this was brought into question once enlightened employees realised the requirement to be physically present in a workplace five days a week is not strictly necessary.

Of course, there are many vocations that require employees to be on-site, performing specific manual tasks, and this argument is not relevant to Britain’s services industry. But technology has evolved to such an extent that a large swathe of employees can perform their duties at home, in a café or even on a beach, in a way that would have been unthinkable even five years ago.

The ILM survey found that many companies have continued to offer flexible working once they discovered how functional and cost-efficient it can be. Boris Johnson’s assertion that this model is a “skiver’s paradise” has been proven wrong.

A country’s productivity rate is critical to its economic prosperity. We are now starting to see a slight rise in the output among workers after a protracted slump in recent years. Yet we still have a sizeable productivity gap compared to other countries and there is a persistent view among experts that productivity has been permanently eroded by the recession.

Yet four in ten employees say they work as hard as they possibly can. Long hours and a heavy workload are clearly taking their toll, with stress-induced absence from the workplace costing UK PLC billions of pounds. Clearly, something is not right.

Helping young people in particular to work from home in more affordable parts of the country, or even giving them a break from the daily commute once a week, would give our economy a much-needed shot in the arm. We would quickly see a lift in morale, productivity and spending within this vital demographic. Money that would otherwise be spent on travel and ridiculously high rent could also go towards deposits for houses and pensions, which we all agree would vastly improve young people’s prospects. There may even be a renaissance on our high streets, completely torn apart by the rise of the internet, as young workers no longer regard online shopping at the end of a long working day (or week) as a more convenient option than visiting their local shops.

Last but not least, it would be brilliant preparation for young men and women who want to have a family in the future. They could gradually adjust to a model that allows them to keep up the same rate of work while caring for children. Otherwise, mums and dads have to cope with a sudden life-changing shift that is hard to handle after years of the daily grind.

What do you think? Leave your comments below.

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Filed under Economy, Employment

A company that targets unemployed students – and why the payday loan damage has already been done

Britain’s financial watchdog has published its long awaited report into how payday loan companies should be kept in check. But is it a case of too little, too late?

Iona Bain

The payday loan has become the product that we all love to hate. Yet a quick google search for payday loans will throw up millions of results, and we probably all know a friend of a friend who has borrowed a quick slab of cash to tide them over.

For those two reasons, we are starting to see the inevitable backlash to the backlash. With so many companies offering this service, and so many people eager to use it, surely the payday loan market serves a useful purpose?

This is a logical argument when you consider how difficult it would be to borrow small chunks of money from any other institution in less than an hour. Payday loan companies have thrived because banks in particular cannot realistically offer a comparable deal.

But credit unions certainly can. For instance, the Glasgow Credit Union runs a worthwhile service which gives quick loans to approved candidates if they have been diligently saving with the credit union over a reasonable period. Yet how many young people know this about this solution, let alone take advantage of it?

JWC Money

The Scottish winners of this year’s Money 4 Life Challenge from James Watt College in Kilwinning are doing their bit to spread the word. The JWC Money project is ardently in favour of credit unions as a means of keeping a young person’s financial situation on an even keel. They are wholly against toxic and unnecessary payday loan companies, drawing on their friends’ devastating experiences at the hands of this industry. They are determined to make young people aware that there is an alternative that really does have their best interests at heart. Here is a bit more about their fine work;

“We teamed up with our local Credit Union, contacted local MPs and secured the support of Young Scot to assist us in launching our own college information and access point. In addition, we used social media (Twitter and Facebook) to help publicise our project. We created our own website to provide information for potential savers and to highlight the work being carried out as the project progressed. Our launch took place on the 1st February 2013 and was a tremendous success. We were fortunate enough to have three MPs in attendance and two of them spoke passionately in support of our efforts.”

As I pointed out on LBC radio a few weeks ago, banks could do worse than copy a model which allows people to borrow, so long as they have saved into a pot of money and can demonstrate they will pay it back. This also allows us to kill two birds with one stone when addressing the lethargic saving pattern among many young people.

Of course, there have been numerous surveys that have dispelled the myth that young people are incapable of saving for tomorrow. However, the low interest climate, the seemingly futile nature of saving for gigantic house deposits and all the other financial pressures coming to bear on young shoulders mean we need to create new incentives to save money.

But another key reason why so many vulnerable citizens, including young people, draw on payday loans is because they cannot see another way to get through. Instead of shrugging our shoulders and accepting this as a fact of life, we must once again look at the “quick-fix” financial attitudes that permeate our society, and whether they create more harm than good.

Financial education will not be compulsory in English schools until next year. Until then, money lessons will only appear where enlightened teachers are endorsing and promoting the idea. It is already too late for my generation; it really was pot luck as to whether we would gain any financial wisdom from our elders when we were growing up.

Meanwhile, payday lenders know every trick in the book when trying to lure young people into taking out unsuitable loans. Technically, both the OFT and the FCA will frown upon payday loan companies that appear to promise quick cash with no credit checks. They will also not take lightly to firms exploiting financially vulnerable people, such as the unemployed or students.

But I found one payday loan company that is ticking both boxes! Step forward “Unemployed Student Loans”.


It is difficult to judge whether this outfit is based abroad, and that is critical in determining whether this is an outright fraud that could easily take young people’s money, or whether it would simply fall outside the UK regulator’s remit.


It indicates how uncontrollable internet-based companies can be, and why we should have set much harsher conditions for payday loan companies before the problem got out of hand. Good luck to the FCA in trying to tone down the pernicious elements of this phenomenon – it will need all the help it can get.

In the meantime, we need to support the Archbishop of Canterbury ‘s aim to promote credit unions as a viable alternative. Please go to JWC’s website and Twitter page, and join the campaign to support our local credit unions.

Here are five ways that you can fight the good fight:

1) Find out what your local credit union does, and see if it can provide you with some information (leaflets etc) to distribute to friends and family.

2) Ask your teacher, supervisor or the staff at your college whether you could do a presentation on this subject – or perhaps you could discuss the possibility of getting a local credit union to pay a visit

3) Apply to the Money 4 Life challenge with your friends – for more information, visit https://www.moneyforlifechallenge.org.uk/

4) Write to your local council and request for payday loan companies to be blocked from public libraries in your area, if this hasn’t already happened. Local authorities in Manchester, Birmingham and Dundee have already done this.

5) Report any dodgy-looking companies that you come across to the Office of Fair Trading’s action helpline (see my previous post for more details)

6) Compare and contrast various banks in terms of their overdrafts. There are a few that will permit you to borrow money interest-free up to a certain level. Check how long the 0% interest buffer lasts, and also whether a monthly fee for using the account applies. I will be coming back to this subject in more detail soon.


Filed under Banking, Money Advice, Payday loans, Personal Finance, Personal Finance Education

The ABC of DIY investing

Herald Scotland

By Iona Bain

Saturday 7 September 2013

WE are eight months into the new world of compulsory fees for financial advice and it seems many Scots are far from happy to pay the bill.

Up to one-third of active investors have ditched their financial advisers since behind-the-scenes commission – a company’s reward for advisers who recommended its products -was banished in January, says research firm GfK.

Advisers now have to charge by the hour, typically quoting £160, or take a chunk off your invested assets each year, at an average rate of 2.67%, according to the My Touchstone database. The latter could cost you £1335 if you had a portfolio worth £50,000.

Major investment firms such as Scottish Widows have reported an influx of so-called “orphaned” investors, cut off from their financial adviser because they cannot afford upfront fees, buying directly from the firm. Many are turning to online tools offered by a widening choice of “platforms”, that allow them to take the reins of their portfolio seemingly at a much lower cost.

Willis Owen, the online discount broker, has reported a 115% surge in new business over the last year, suggesting that many are happy to use an “execution only” service that simply lays out funds for you to pick and mix. The biggest player in this market, Hargreaves Lansdown, is now hoping to win over DIY investors by offering a list of 30 funds at exclusively lower prices.

Does all this mean that financial advice is on its way out? Not necessarily. Adviser rating website Vouchedfor, in a recent sample poll, found the vast majority (97%) of advisers saying they have welcomed rather than lost clients since the dawn of the new era.



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Has the short-term credit market reached a new low with ‘Loans for Poor People’?

Online loan companies and brokers are using tawdry tactics to try and attract vulnerable customers – what can we do to make sure this doesn’t have terrible consequences?

by iona bain

New rules were ushered in this year to ensure that the term “independent financial adviser’ can only be used to describe someone with top qualifications and the ability to recommend all kinds of products to consumers. But what happens if we chop off the word ‘independent’? Well, just about anybody can pass themselves off as a ‘financial adviser’ – even promoters of quick fix loans that could do more harm than good.

I have come across a site called “Loans for Poor People”, which recently appeared on a forum for real financial advisers. The individual behind this firm calls himself a financial adviser on Linkedin and various blogging sites. It is not a joke, as far as I know, even though the website absurdly states that it is ‘designed for the deprived’.

I have never come across a more dehumanising name for a financial services outfit than “Loans for Poor People”.

What’s more, the Office of Fair Trading recently raised alarm bells over the damaging slogans used by the short-term loan sector, such as ‘no credit checks’ and ‘get cash ASAP’. I have seen some of this flippant language used by firms like LFPP on forums, and have reported my concerns to the watchdog. It is now looking into my complaint and assures me it is taking it very seriously, given that this firm does not appear to show up on its public register.

Stuart Carmichael at the Debt Support Trust agreed that this company’s title was exploitative. He said: “I was amazed to see the company is promoting loans for people in an IVA & bankruptcy. I’m not sure whether the people behind this are foolish and targeting the deprived or unethical and aware of the error they are making. As an intermediary, they will get paid when people take a loan from another company. Most people in a deprived situation will do anything for credit, so this company probably feel they can maximise their profits by targeting people in a desperate situation.”

The title suggests that people who are in a vulnerable position should self-identify as ‘poor’ or ‘deprived’, and that the magical cure-all for that desperate predicament is simply the right loan at the right interest rate. If such people really are in need of help, surely an ethical and responsible ‘financial adviser’ would seek to lay out all their options, including debt advice charities and the Citizens Advice Bureau. It is not clear whether an applicant for a loan on the site would receive such information.

Church Action on Poverty, a Christian social justice company in the UK, released a report earlier this year which highlighted the stigmatic terms attached to people in financial difficulty, and rightly argued that they deserved more compassion and better understanding.

Firms like LFPP are trying their utmost to promote products, which may be totally unsuitable for many consumers, under the auspices of financial advice. Thankfully, they will not always succeed, as many savvy consumers will not fall for it.

But history tells us that the public is not necessarily alive to false marketing, mis-selling and poor advice – far from it. And the number of young people who are going online for financial information cannot be underestimated. It’s a recipe for disaster.

LFPP says it is neither a broker nor a lender. Instead, it matches ‘poor’ customers to the most suitable loans on the market for, apparently, no fees. Mr Carmichael said that the firm is likely to be paid commission every time if refers somebody to their service. But it is a mystery as to which third party firms obtain your details from this ‘matching service’, whether they would be adequately regulated and what kind of costs will be involved during the process. After all, the terms and conditions page simply links to a different website where you can apply for a loan instantly.

Of course, it’s hard to see what the regulators could do about the uncontrollable jungle that is the internet. But if you have doubts about a firm, you can call the Office of Fair Trading consumer helpline. You can also search its public registry to see if a firm has a consumer credit license. You can report firms on social media sites who use demeaning terms to describe certain sections of society. You are, by no means, powerless.


Filed under Loans, Payday loans, Personal Finance, Technology

Is Lady Gaga and the like taking young fans for a ride?

As One Direction and Lady Gaga are set to cash in on their newest projects, I look at the marketing techniques deployed by the entertainment industry, and ask whether it is financially exploiting young fans


Why has a band like One Direction made so much money? That is, literally, the billion dollar question that is being widely asked this week, since Business Insider Magazine has now predicted that the boyband will be worth a cool 10 figure sum thanks to the release of their first film.

It is easy (and perhaps lazy) to attribute this handsome bank balance to the disposable income of teenage girls. After all, where do they get all that cash from? It’s Britain’s most forgiving and reliable financial institution, of course.

Bank of Mum and Dad PLC is paying for the concert tickets, the album sales, even the make-up range that 1D is planning to bring out (and no, I’m not making that up, if you pardon the pun). It even branches out into providing unpaid security and chauffeur services when teenage girls want to go screaming to One Direction’s live concerts, as this photo aptly demonstrates.

Falling asleep: Vice photo editor Jamie Taete took pictures of bewildered fathers at a recent One Direction concert in Los Angeles

BMD provides this extraordinary service because it recognises the powerful pressures that are exerted on young people to buy into certain cultural phenomena. Let’s face it – resistance is futile. Teenagers have an overwhelming urge to conform and consume; this overrides all other considerations, since young people have not yet grown into mature consumers who can discern real value, know what it’s like to work hard for money and can recognise when they are being financially exploited. Institutions, politicians and even parents often forget the urges that drive the younger generation – that is partly why many of my peers do not receive advice on how to overcome commercial influences and become more savvy individuals.

I believe the One Direction Corporation is bankrolled by BMD Limited under the tacit agreement that it will not take the mick by charging excessive amounts for its goods and short-changing its loyal fanbase. There is no evidence so far that it has done either. But this week, another pop star stands accused of financially preying on young fans.

Lady Gaga is currently running a competition in the U.S. via Twitter, where fans are encouraged to buy multiple copies of her new album, among other things, if they want the chance to be her ‘date’ at the London iTunes festival in September. There are reports that some young customers have spent up to $200 on her new album in order to be in the frame. Entrants can also submit fan ‘artwork’, but I suspect this pays lip service to critics who say the scheme has been devised purely to drive album sales.

Many of her ‘little monsters’ will be young and therefore highly susceptible to this astute marketing technique. They’ll inevitably feel under pressure to spend money they don’t really have in the vain hope that they’ll meet their idol. They will receive no benefit from purchasing more than one album – in my opinion, the songs all sound the same if you listen to one copy of the album, let alone a different one. But the ploy will sure bump up LG’s album sales.

Young people can get easily caught up in the zeitgeist, and the entertainment industry knows this all too well. The film critic Mark Kermode once had a telling exchange with a producer for the blockbuster film Titanic, which made over $2bn across the world. In his book “The Good, the Bad and the Multiplex”, he said that the studio mogul discounted all his criticisms of the film by saying; “The problem, Mark, is that you are not a teenage girl”.

If we have any chance of regulating our natural impulse to spend as  we grow up, we must be more aware of the persuasive and even manipulative marketing strategies used by the entertainment industry.

My very first blog highlighted the impossible economics that were developing in connection with music festivals, relying as they did on broke young people to pay ever-higher sums in order to watch the same old acts year-after-year. Just as music festivals eventually suffered a backlash, so too could pop acts who deploy questionable tactics when trying to elicit spending among young fans. Gaga, you have been warned.

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Filed under Consumer Affairs, Leisure, Music, Shopping