High-risk investments are generally signposted by large return rates over short periods, offering investors big payouts for big investments. However, the risk cannot be understated when it comes to banking on alternative investment schemes such as biofuels, foreign emerging markets, or international property development. The Financial Conduct Authority (FCA) has attempted to safeguard consumers from being mis-sold investments of this nature by cracking down on independent financial advisors (IFAs) that advertise such high-risk investments.
The FCA released a business plan promising to “tackle incidences of consumers entering into high-risk investments which are unsuitable for their needs”. It promised to take a firmer stance with firms that provide advice on complex investments, avoiding future incidents of mis-sold investment with high-risk funds by providing more robust supervision to regulated IFAs.
The plan characterized high-risk investments as products with:
“unusual, speculative or complex product structures, investment strategies or terms and features…which are unlikely to meet their [consumers’] savings or investment needs”.
While high-risk investments can and have paid off for consumers in the past, the nature of the risk is such that these investments are rarely suitable for consumers with little or no investment experience. Even seasoned investors can be caught out by volatile market conditions or deliberate mis-selling. Several high-profile cases of mis-sold investments have followed consumers who were convinced to invest savings, to borrow against equity to invest, or to transfer their pensions into a financial investment scheme which significantly underperformed, resulting in devastating financial losses.
This plan follows from an FCA consultation paper that claimed the rules framework in place for IFAs should ensure that clients receive good, suitable advice from an IFA. Yet too often firms were ignoring these rules, subsequently selling investments that were unlikely to achieve their advertised rates of return. Often, IFAs profit from such client relationships through high charging structures, with fees for entering new funds and penalties for making withdrawals. Victims of such mis-sold investments, who have not had the value of their funds reduced to zero, face the prospect of paying out large percentages to cut their losses.
What to Do About Mis-Sold Investments
It is important to remember that not all high-risk investments lead to catastrophic results. Yet it is also important to remember that IFAs have a duty to provide suitable advice on any investment fund. As a consumer, you are entitled to receive impartial advice with full disclosure regarding the potential risk, and any fees or penalties involved. You might not have been deliberately defrauded, but if you were not fully aware of how your investment portfolio or its charging structure could function, then you may have been mis-sold investments. As such, you may be entitled to compensation.
Mis-Sold Investment Claims from Money and Me
Money and Me Claims is an independent financial claims management company with almost 10 years’ experience of handling claims of mis-sold investments and financial products. We have a thorough understanding of the market and the claims process, with a proven history of achieving substantial compensation sums for our clients.