How do I know I am not being ripped off?
If you have ever walked out of a conversation about money wondering whether you were just sold something you did not need, you are asking the right question. Most people in the UK get ripped off in small, quiet ways, and it adds up to real money over a lifetime.
The three most common places young adults get ripped off: overpriced financial products (high-fee investments, dodgy insurance add-ons, extended warranties), auto-renewed contracts that quietly hike in price (insurance, broadband, energy, mobile), and being sold the wrong thing by someone on commission.
The single most powerful thing you can do is slow down. Almost every “act now” pitch is designed to stop you checking. Always take the time to think and ask yourself the question — “Do I understand what I am paying for and why?”
Financial products are priced in fees, and fees compound. A fund with a 1.5% annual fee versus one with a 0.2% annual fee does not sound like a big difference. Over thirty years on a £50,000 portfolio it can be a £50,000 difference in what you keep. Most people have no idea what fees they are paying on their investments or pensions. Finding out is the single highest-return half hour you can spend.
Auto-renewals are designed to exploit the fact that most of us do not read every email and do not shop around. Insurance in particular is notorious — stay loyal and you get punished. The Financial Conduct Authority finally banned this practice in motor and home insurance (the “loyalty penalty”) in 2022, but workarounds exist and other products are unaffected. The fix is to diary-note every annual contract and shop it around before it renews, every single year.
Commission is the third one. Anyone telling you what to do with your money who earns a commission based on what you buy is incentivised to sell you something, not necessarily the right thing. This is not always bad — some commissioned advisers are excellent — but it is a conflict of interest you need to know about. Independent, fee-only financial advisers exist and are usually worth paying. The rule of thumb: if the advice is free, ask who is paying for it.
The best single defence is to slow down and ask, in any money conversation: what are the fees, what are the alternatives, and who is paid what if I say yes. If someone cannot or will not answer those questions clearly, walk away.
What you can actually do this week
- Find the fee percentage on any pension, ISA, or investment you hold. If it is above 0.5% for a tracker fund or above 1% for anything else, start asking why.
- Diary-note your car insurance, home insurance, broadband, and energy renewal dates. Shop every single one when they come up.
- If someone has suggested you buy a financial product this year, look up whether they are commission-paid or fee-only before deciding.