7 June 2010

Useless Financial Products

Which? Money Quarterly has come up with an interesting list of its top ten useless financial products. Here's what they think, with my comments ["PTF"] where there is anything worth adding! I'm very glad that they recommend going to an independent financial adviser for expert help.

Mobile phone insurance: Most people are already covered by their home insurance

Extended warranties: These are too expensive to ever be worthwhile. Cost: Up to half the cost of the product itself
[PTF comment: I always think that the harder someone tries to sell you something the more important it is to them to sell it - and less valuable to you! - certainly agree with that one]

Structured products*: Can be confusing, complex and costly - put your money into an Isa
[PTF comment: Care is certainly needed - there is more awareness these days on the "counterparty" who backs the product - but I don't agree that they are useless products - they have a place in a larger portfolio at least]

ID fraud cover: Most losses will be met by your bank

Payment protection insurance: Choose income protection, and avoid over-priced PPI
[PTF comment: yes - Income Protection is the most under-used life insurance - it replaces (some of) your income if you are ill - essential unless your employer pays out generously. That way YOU can decide what payments to keep up.]

Secured loans: Are risky - only take out unsecured loans

Store cards: Have high interest rates - try a Which? Best Rate credit card instead

Debt management plans: Ditch this expensive product and get free debt advice from CCCS, the National Debt Line or your local Citizens Advice Bureau

With profits: Can incur high charges, so invest your money in stocks and shares Isas
[PTF comment: I would tend to avoid With Profits plans for a new investment / pension (although there are still a handful of good products around). The case is less clear if you have such a product already - worth reviewing at the very least.]

Packaged accounts: Often not worth the money, so replace with a Which? Best Rate current account

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