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Product descriptions must be explained

Providers must explain to consumers what is meant by terms such as guaranteed, protected and secure when they are used in financial promotions.

In its quarterly consultation paper, the FSA says: “The industry has developed a growing and innovative market for products, including structured products, which are often described as guaranteed, protected or secure.

“We have reviewed this market and concluded that some firms promote these products without any clear and adequate justification for the descriptions used. We believe this could be implicitly misleading and lead to consumers misunderstanding what is offered to them.”

The FSA is proposing guidance, to be consulted on “at a later date”, which will require providers to explain to consumers terms such as guaranteed, protected or secure in financial promotions and product literature. If the FSA proceeds with these proposals, providers will have six months to comply.

Lowes Financial Management managing director Ian Lowes says: “Over the past two years, structured product providers have been taking significant steps to clarify the terms of their products and to make their literature consumer-friendly.

“Certainly, use of the word guarantee in respect of structured products has pretty much disappeared, except in the Treasury-backed National Savings and Investments’ guaranteed equity bonds.”

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There is one comment at the moment, we would love to hear your opinion too.

  1. Missold Investor 10th June 2011 at 10:32 am

    Where there is counterparty risk and lack of FSCS cover for counterparty failure, can these products ever really be described as “guaranteed”, “protected” or “secure”?

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