According to FT journalist Paul Lewis, there are tell-tale signs that help consumers and experts spot whether a financial scandal is on the horizon. Lewis points out that banks will always “lead the field” regarding financial products used for profiteering rackets similar to payment protection insurance in the United Kingdom. Citing studies, he unveils the three characteristics of future financial scandals.
Banks Will Lead
The CCP Research Foundation states that the PPI scandal is the result of banks using concealed tactics to suggest to consumers a product they wish they will not discover as wrongly sold. Banks will never stop using financial products in this manner in the future.
Any financial product or investment option given to consumers is always added with salt by banks. According to Lewis, any product that will suggest a risk-free and guaranteed return should be viewed with extreme scepticism. A 50% return, even if it seems reasonable, is not realistic. A better figure is 6% or even less.
Lack of Research
A shady market is not exactly hidden from the public, but it makes promises that sometimes investors do not understand. Lewis said that in the case of mis-sold PPI, consumers only knew their bank employees had knowledge of PPI and said it gave better chances of earning loan approval. A product or service not thoroughly explained is the biggest sign of an impending financial scandal.