Warning: The people you trust are stealing from you

The big institutions we used to trust to look after our savings and other financial policies are taking you for granted, says Tom Bulford. Check what you're paying and what you're getting in return. And if necessary, take your business elsewhere.

Today, I have a very important message for you: a warning to be on the lookout for 'robbery' from the people you thought you could trust.

Before I explain what I mean, it seems like my mobile phone number has found its way onto another scam target list. Just a couple of weeks ago I was complaining about Melanie, the girl who pestered me to buy vintage wine. Since then I have answered three calls from a guy trying to sell me land in Western Australia - land which I doubt exists any more than the vintage wine does.

But being ripped off by petty criminals is one thing. Being taken to the cleaners by so-called pillars of the financial establishment is quite another. And that's what I'd like to talk about today.

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The Sunday before last you may have heard Frank Skinner on Desert Island Discs. He described how his personal banker at Coutts had advised him to place his money with the US insurance giant AIG. Can't go wrong there, he must have thought. The finest financial advice. The biggest insurance company in America. What could possibly go wrong?

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Well, AIG punted Skinner's money in sub-prime mortgages and lost it. Skinner was almost embarrassed to admit that he had lost millions. He seemed able to make light of it - but not many would.

How the financial establishment loses our trust

A fortnight ago I was at the house of my 85-year-old mother. I picked up her home insurance renewal quote and was shocked to find that, at some £2,000, it was double the figure of the previous year. I phoned up Axa for an explanation.

"A claim was made during the year," I was told, "so your mother lost her no-claims bonus."

I was puzzled, but then I remembered that a passing motorist had skidded during the winter freeze and damaged my mother's gate.

At the time I made an enquiry about an insurance claim, but concluded that it was not worth pursuing. However, as far as Axa was concerned, the claim was still open, so it had cancelled the no-claims discount and whacked up her premium by 100%.

The really absurd thing about this is that, even if the claim for a new gate had been pursued, the maximum liability to AXA would not have been more than £200. And yet it used this to justify a £1,000 per annum increase in the insurance premium! A rip-off? I'd say so!

And now my own domestic insurance policy is due for renewal. Last year I paid £280 to Cornhill Insurance. This year's renewal quote? A cool £1,104.48!

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Again I picked up the phone. "Your post code rating has changed," I was told, "so the premium has gone up." No explanation was offered.

Had a gaping chasm suddenly opened outside my front door, or had a raging hurricane ripped the roofs of the homes of north Oxford, then I am sure I could forgive Cornhill for adopting a cautious approach. But nothing has happened in this area to make it any more or less risky than it was 12 months ago.

I am at a loss to understand how these big insurance companies conduct their business. There is no logic, and not even an attempt to explain these gouging price increases. Just a demand for payment, and a hope that the policy-holder will be too busy or infirm to read the letter - or too scared or ignorant to contest it.

The banks are no better. Filling in my tax return for 2009/10 has brought to my attention just how little interest I have been receiving on my savings. Worst of all was my ten-year-old cash ISA with Barclays.

I used to get about 4% tax-free on this account. Not bad. Last year, without warning or any form of communication whatsoever, the rate was cut to 0.1%!!

I phoned a man at Barclays, who told me how much it valued my business (!) and that it did not want to lose my deposit.

"Well if you don't want to lose it," I replied, "try offering me a reasonable rate." This he was unable to do, and so I switched the whole lot to Birmingham Midshires, which pays 4.25%.

An important financial lesson

There's a lesson to be learned from all this: Trust nobody! Look carefully at all your savings accounts and financial policies to check what you are being paid and what you are being charged.

The fine reputation that the companies who are supposed to look after your money have historically enjoyed was based on the belief that you could trust them. That you could rely on them to play fair and treat you decently.

No longer, it seems. They are little better than the fine wine or Australian property scammers. 'Financial services' has just become another term for legalised robbery. So be on your guard!

This article was first published in Tom Bulford's twice-weekly small-cap investment email The Penny Sleuth .

Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.