Don’t get conned by your bank’s supposed “savings” products. And zuckers get fleeced

Today, high-street bank customers will be presuaded to put about £32m into a savings scheme known in the industry as “structured products”. Then tomorrow another £32m will go in and so on, probably for the rest of the year. With interest rates still below the level of inflation, bank customers are easy targets for commission-hungry bank staff out to increase their own salaries and promotion prospects by flogging “structured products” to their customers. Typically, a structured product will promise to return about 120% of any increase in the stock market over about five years, but will guarantee to return the customer’s capital in full if the stock market falls.

The main problem is that over 80% of the benefit of stock-market investing comes from the dividends paid by the companies whose shares you buy – not from any increases in the overall market. Yet these structured products don’t give customers any dividends – often because they never actually buy any shares. It seems that most customers don’t understand this. In about five years there are going to be many hundreds of thousands of surprised bank customers when they find their supposed “savings” scheme has not increased at all. In fact, they will have lost money due to inflation.

However, there may be one structured product that could work. Some banks are offering returns of 8% or more a year if the stock market is higher each year than when customers first invested. With the market down below 5300 at the moment, these products might actually pay out.

Meanwhile, as we learn more about Facebook’s IPO and how the big investors got out while the going was good by “pumping” the share price and concealing poor revenue growth forecasts, once again ordinary savers find out that stock markets are rigged against them. The rich get richer, the poor get fleeced. If you happen to own Facebook shares, be prepared for a fall to around $10 to $15 per share – somewhat below the IPO price of $38. No wonder, Mark Zuckerberg is always grinning.