On Saturday evening, I ventured into the deep dark woods with my six year old daughter and we did battle with zombies, witches and werewolves.
Actually, we enjoyed an hour of walking with head torches through the Chantries woodland in Guildford, courtesy of AAT Events and their Night Fright family walk.
This got me thinking about some of the scariest financial services we come across in our daily working lives.
Today is Halloween, possibly the most terrifying day of the year, so here are six of the scariest financial services we think exist right now.
So make sure your front door is locked, grab a torch and hide behind the sofa.
Pension liberation schemes
These schemes (or should that be ‘scams’?) offer the chance to access the cash in your pension fund before age 55.
This sounds good in theory, but in practice it is a breach of HMRC rules and comes with hefty tax penalties.
Add to that the high charges and typical requirement to invest what remains of your pension fund in a dodgy unregulated overseas scheme, and you will be lucky to see any of your pension fund at all – either pre or post retirement!
Payday loans
We have all heard of the astronomical APRs associated with payday loan companies.
As expensive as the products might be, the real problem with payday loans is they are symptomatic of a wider problem with budgeting and living within your means.
If you need to resort to a payday loan company, you need to get back to basics.
Start with a household budget which ensures you spend less than your earn each month. Build yourself a cash emergency fund which ensures you never have to resort to expensive short-term debts.
Unregulated collective investment schemes
Shortened to ‘UCIS’, these are investment funds which are not authorised or regulated in the UK.
The Financial Conduct Authority (FCA) has now banned their promotion to retail investors, but that has not stopped some advisers from exploiting loopholes and continuing to sell them.
There are one or two ‘good’ UCIS funds out there, but the vast majority are simply terrifying. They tend to invest in esoteric assets and the lack of regulation places them at a higher risk of fraud or misappropriation of assets.
For 99.9% of all retail investors, there is no need to ever consider investing in a UCIS, as plenty of more suitable (and better regulated!) alternatives exist.
Bank advisers
If you want good investment advice, don’t visit your bank.
Time after time we have seen examples of terrible investment advice offered by the banks, as their salespeople thrust unsuitable products on unsuspecting customers.
With a limited range of investment products to sell, the banks are generally not in a position to offer any form of impartial advice.
They sell, you complain, they compensate. It’s not exactly the recipe for long-term investment success.
Inverse Exchange Traded Funds
Exchange Traded Funds (ETFs) are an increasingly popular and low-cost way to invest and replicate returns of a specific investment index or asset class.
An inverse ETF is designed to perform as the inverse of whatever index or benchmark it is designed to track. They work by short selling, trading derivatives or using other leveraged investment techniques.
Leaving aside their higher fees and potential for systemic impact, inverse ETFs are scary because they are best suited to short-term trading, rather than long-term investing.
