Structured products aim to provide a higher return than savings accounts, whilst also protecting an investor’s capital. However, mystery shopper results show that customers have not been receiving the quality of advice they should expect.
The FCA, successor to the FSA, is less than a month old and is already causing a stir in the investment market. After last year’s mystery shopper results were published, it became abundantly clear that customers were not receiving the quality of advice that they should expect, particularly on investments. These results, along with the results of the asset management thematic review, prompted Martin Wheatley to announce a “dedicated wealth management department within the FCA supervision area”.
One type of investment product currently causing problems is structured products, which aim to provide a higher return than savings accounts whilst also protecting an investor’s capital. In recent years, with the volatility of the stock markets coupled with low interest rates, structured products have been increasing in popularity. However, it would appear that they might not have been all that they were promised to be.
In February of this year it was announced that Investec and Morgan Stanley were to change some of the terms of their structured product investment plans after the FSA had considered them to be “unfair”. In a speech at the London School of Economics this month, Martin Wheatley described structured products as “spread bets on steroids”.
We have already seen an increase in structured product reviews at Grovelands and it was announced this month that Lloyds Banking Group would be reviewing sales of Scottish Widows structured products sold between 2007 and 2012. The news comes after a sample review, prompted by an investigation by the Daily Mail, found that the investments were mis-sold in 1 of 4 instances and maturing funds were often paying out less than the returns quoted.
With Lloyds’ announcement coming little more than a week after Martin Wheatley described structured products as inherently complex and “mind-bogglingly complicated financial gambles”, it would appear companies are taking heed of the FCA’s more customer focused approach and we may see other firms following suit.