Citywire for Financial Professionals
Stay connected:

View the article online at

15 financial risks for investors and savers

The Financial Services Authority has warned about 15 risks that consumers face from financial services; ranging from buy-to-let fraud and mis-selling to greedy advisers and bad banks.

15 financial risks for investors and savers

Complex and risky products, mis-selling and unfair mortgage terms are among the 15 biggest risks consumers could face this year when dealing with financial companies, according to the City regulator

In its Retail Conduct Risk Outlook paper, the Financial Services Authority (FSA) said investors and savers were struggling with the effects of a slower economy, low interest rates and poor investment returns.

It noted that as consumers tried to save more and pay off their debts they were at increased risk of being sold unsuitable products that are too risky, they do not need or that they do not understand.

The areas the regulator is most concerned about are:

1. Cost cutting leads to mis-selling

The FSA is concerned that cost cutting within banks and building societies will lead to product mis-selling and an increase in staff being incentivised to cross-sell. It warned that staff remuneration and reward schemes could be a driver to consumer detriment.  

2. More complex products

Low interest rates and volatile markets could increase the number of complex and risky products being made available to consumers. It made particular mention of structured products, trade life policies, unregulated collective investment schemes and exchange traded products.

3. Advisers' commission grab

The requirement for financial advisers to ditch commission and operate a more transparent business through new legislation known as the retail distribution review (RDR) could see advisers rush to grab as much commission as possible before the new rules are implemented on 31 December 2012. The FSA also warned that consumers must ensure they receive on-going financial advice from their adviser if they are paying for it.

4. Insurance standards

The regulator has noticed that ‘benefits and cover in some general insurance policies are being eroded relative to the standard that consumers have come to expect, while additional administration and cancellation charges are also being introduced’.

The payment protection insurance (PPI) scandal has also left its mark, with the FSA concerned new protection products will be created that do not serve consumers well.

5. Governance of funds in life insurance companies

The FSA is worried that life assurance funds are failing to maintain the stated risk profile, putting consumers' money at risk. It said that inadequate disclosure may mean the consumer may not understand the risk they are taking.

6. Distributor funds

This risk is posed by independent financial advisers that run their own funds, known as ‘distributor funds’. The regulator is concerned that the distributor funds do not have sufficient systems and controls to guard against risks because of their size.  

7. Inadequate complaints handling

Consumers are exposed to detrimental treatment if their complaints are not dealt with speedily or if the complaints are unfairly rejected. The FSA highlighted the banks' poor record of complaints handling, particularly in relation to PPI, that had led to widespread consumer detriment.

8. Investment propositions

The use of platforms and wraps by financial advisers is of concern to the FSA. Platforms and wraps are a type of technology used by advisers to aggregate all of a client's investment, savings and pension information and enable the adviser to invest and move your money and invest it easily. The FSA is worried that consumers’ assets will be placed on a platform as a default even though it is not suitable.

Sign in / register to view full article on one page

13 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Mar 13, 2012 at 12:37

The biggest risk is Government overspending/over regulation/over taxation, the rest is nothing compared to this.

report this

Chris Hayes

Mar 13, 2012 at 13:20

16. The FSA themselves - and it's replacement(s) - are so OTT having dropped the ball(s) previously that they drive costs up, competition out and returns down for the vast majority of us!

report this


Mar 13, 2012 at 14:09

@ anonymous1

Absolutely - the Govt is the biggest threat to us all by a huge margin

Plus the way the govt is actively debauching the currency with QE and causing that inflation arbitrarily reallocates wealth and steals income from certain classes of people and destroys pensions...and taxes people on illusory inflationary is the Govt that is the biggest fraud of all

report this


Mar 13, 2012 at 16:43

17. Investment funds with a wide spread. My wife has one where the spread has been up to 20% of the price for an in-house fund from Santander.

report this

James Button

Mar 13, 2012 at 17:33

Arm bonds - an SLS 'vehicle were doing very nicely


The regulator required them to be 'authorised' to trade 'in the manner they were doing' and to qualify for that authorisation required them to hold enough 'liquid funding' to pay the entire premiums for the approximately 8 remaining years of the 10 year expected life of the bonds.

What business runs with cashon hand to pay for the full running costs of the next 8 years?

report this

Jeremy Bosk

Mar 13, 2012 at 19:49

2, 8 and 12 are the FSA saying that consumers are ignorant halfwits who cannot be trusted to look after their own financial affairs. The rest of the fifteen points are saying that the financial services industry is full of incompetents and con merchants.

If consumers are so stupid, why are they allowed to make other important decisions such as buying a house or VOTING? I suggest the abolition of democracy as plainly the British public is incapable of self government. Oh, wait, we already have that. All the main political parties are ideologically close and their leaderships are self perpetuating oligarchies. Foreign policy was surrendered to Uncle Sam decades back.

So why not abolish consumer choice entirely? Consumers eat unhealthy food and too much of it (mea culpa on the last one). Ban junk food. Consumers smoke - shoot the manufacturers and sellers. Consumers drink too much...

report this

tony williams

Mar 14, 2012 at 11:10

give me a desert island and a back garden

report this

John Osborne

Mar 14, 2012 at 11:15

This seems more like the report on an internal policy direction paper. Instead of spending time on formulating generalisms like this paper the FSA should spend more time actually curbing the offenders.

Is it just me, or do other people find the recent trend of continually moving advertisements on the Citiwire pages distracting when trying to read the articles? Is there a way of blocking them? This SippDeal one seems particularly bad.


The words "democracy", "consensus", "national interest" seem to have lost their meaning under the polarised ignorant shortterm views of our younger breed of professional politicians and EEC bureaucrats. Whether voters are ignorant or not it makes little difference if all their rulers are corrupted by false ideology rather than technical competance.

report this

Knowledgable insider

Mar 14, 2012 at 11:50

Has nobody noticed that every few years the FSA has yet another new initiative? Apart from keeing themselves busy in their overpaid jobs what other purpose does this serve, as clearly if all past initiatives have failed and need replacing it in itself is an admittance of incompetence! You really couldnt make it up! Blame the idiot called Holben who seems to me to be a self important pompous ass who waves through every word that Sants utters...sack them both and maybe we'll get a regulator that understands the workings of the market.

report this


Mar 14, 2012 at 12:39

Yet another initiative, that reminds me of recent years, just like Mr Brown's way of working, and nothing to be proud of at all. Every day he was announcing yet another initiative, yet more money being poured in here or there in reaction to bad news. He should have fixed problems not created new ones under a different name and at more expense. Instead of new initiatives, the bad workers (whatever level) should be weeded out of the FSA (and gov't come to that) and fewer and better ones should be employed.

report this

John Osborne

Mar 15, 2012 at 12:13

Jeremy Bosk,

Thanks, Adblocker has fixed it. Relief!

Not that I have anything against Sippdeal, they are good value.


Ahh, you have mentioned that word Brown again, everyone, particularly fixed income savers, pensioners, unemployed and the next generation is paying for his policy mistakes, deceipt and arrogant stupidity.

report this


Mar 17, 2012 at 09:29

*ankers are the biggest risk and the goverment for allowing them to run riot!

Low interest rates are choking the normal operation of market economy causing high energy prices, over-inflated house prices, low currency, stagnant economy. Money has a price and it is not 0.5%.

report this

Keith Snell

Mar 17, 2012 at 12:34

That the FSA has been an expensive and largley incompetent regulator is a matter of public record. However that regulation to an industry which has become devoid of all ethics and regularly rips off large numbers of people is also a matter of public record. It is a measure of the incompetence and lack of ethics that so many employees of the sector regularly defend its current record. A return to a more ethically motivated workforce will take a sea change in attitudes and sadly will have to become part of the regulation that is now necessary.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts

In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet