10 things the world of finance would rather you didn’t know

In the first of a new series of posts I plan to expose some of the things that the world of finance would rather you didn't know.

1. Their complaints record – Banks and financial institutions don't want you to know how many disgruntled customers they have or indeed how many complaints they have received. Fortunately the FSA have complied a complaints league table which can be accessed here. And for the record Lloyds, Barclays and Santander are Britain's most complained about banks.
2. When it comes to investing research has shown that low-cost funds outperform high-cost rivals every time. And of course low cost means low profit margins for the investment companies so they'd rather you chose their high-cost option.
3. You will be better off clearing your debt with savings - A lot of people continue to save while they still owe money. This is a false economy, especially, in today’s low interest rate world. If you are earning 3-4% (gross) a year on your savings but are paying 17-18% on any credit card debt you are effectively paying to save money. But banks and credit card companies don't earn money if you don't borrow money or place funds in their ridiculously low interest bearing accounts – so they aren't about to tell you to start clearing your debts are they.
4. Premier bank accounts are not worth the money – Banks are constantly pushing paid for bank accounts which offer a bundle of added extras such as travel and phone insurance. But these products are simply huge profit makers for the banks. Which? Magazine even named premier bank accounts among their top 10 'useless financial products'.
5. The benefit of using the Open Market Option  (OMO) – When it comes to securing a retirement income with your pension fund you do not have to purchase an annuity from the company who holds your pension fund. In fact you will likely be better off if you don't. Research has shown that pensioners could boost their retirement income by as much as 20% by shopping around and buying their annuity elsewhere. Legally the company which holds your pension fund has to inform you of your right to use the OMO when you reach retirement. While they may mention it in the small print they won't make a song and dance about it because they don't want you to move your money elsewhere.
6. The benefits of quote massaging - Although baffling to some people, your job title actually affects how expensive your car insurance is. This is because your job is deemed to affect how you drive and also who you drive. Some jobs can have more than one description – for example a ‘solicitor’ is also a ‘lawyer’. So it is possible for you to use an alternative job description for what you do and slash your insurance premiums.
7. Life insurance offered by your bank is overly expensive - If you buy life insurance from your bank you will not only get less choice but you will likely pay over the odds for it.
8. Banks are cutting savings rates without telling customers -  A survey by Which? Magazine has found that 8 out of the 12 banks and building societies do not contact their clients when they cut the interest rate on savings accounts.
9. Cash funds may not invest just in cash – A number of cash funds which people invest in actually hold non-cash instruments within them. Some invest in securities which can, and have, resulted in negative returns for investors. In 2009 Standard Life ended up paying £100m in compensation after not disclosing their Sterling fund's true nature.
10. The dangers of chasing the best savings rates.

(Image: Francesco Marino / FreeDigitalPhotos.net)