View more on these topics

Should the word guaranteed be banned for structured investments?

Structured investments specialist Chris Taylor has called for the structured investment industry to stop using the word “guaranteed” in its marketing material.

Taylor, who recently set up a specialist consultancy practice The Investment Bridge, says the industry has an opportunity to “exceed the regulator’s expectations through highlighting and suggesting better practices that the industry could proactively and collectively adhere to”.

The FSA’s consultation paper, CP11/11, proposes the introduction of guidance over the use of words like ‘guaranteed’, ‘protected’ and ‘secure’ in financial promotions.

Taylor says the use of the word guaranteed lacks necessity, merit, integrity or justification. He says it would have been easy for the structured industry to simply agree with the FSA but says that more can be done.

He says: “If the industry chooses to provide such a simplistic answer it will, to my mind, mean that the industry itself passes up a significant opportunity to exceed the regulator’s expectations through highlighting and suggesting better practices – that many providers are already following today – that all providers could be encouraged to adopt and adhere to, either through the industry universally accepting what is clearly best practice of its own accord, or through more prescriptive regulation, rules and/or guidance’’.

Taylor says few provider now use the guaranteed term, however he says that given the ‘current regulatory latitude to use the term” it would be difficult for any provider to reconcile use of the word when counterparty risk always exists.

Taylor says it is bizarre that banks and building societies do not describe a normal interest paying deposit accounts as guaranteed, but some do when it comes to stock market linked structured products, where he says that regardless of the risk to capital being identical, interest usually depends on stock market or other asset class performance.

He says: ‘I see no reason for the regulator to continue to allow what now appears to be the scope for nothing more than a distinct minority of firms to exploit what must surely be seen as light touch regulation in respect of deposits.’’

Recommended

Ingram leaves threesixty

Threesixty technical director and co-founder David Ingram is leaving the support services firm. Ingram founded threesixty with David Brattesani and Ross McArthur in 2003 after breaking away from Bankhall. Threesixty was bought by Standard Life in March 2010. John Cromey has been appointed threesixty head of technical. Ingram will take up a consultative role in […]

Bell urges HMRC to relax fixed protection rules

AJ Bell is calling on HM Revenue and Customs to relax rules preventing savers who failed to claim primary protection on their tax-free pension cash on A-Day from taking fixed protection before April 2012. Earlier this month, Money Marketing reported that investors who failed to claim primary protection on their 25 per cent tax-free cash […]

2

Govt faces strike threats over public sector pension reform

The Government must demonstrate flexibility in its negotiations around changes to public sector pensions or it could face further industrial action, according to Trade Unions Congress secretary general Brendan Barber. His comments come after the Government this morning set out proposals to increase contributions to public sector pensions from April by between 0.6 per cent […]

Guide cover

Guide: Johnson Fleming produces auto-enrolment checklist

For a job as big as managing the auto-enrolment changes, it’s important to know what has been completed and what still lies in front of you to give you the reassurance that everything is in hand. Getting the planning and project management right at the outset can help you see the path ahead and ensure everyone knows their roles and responsibilities. To help with this, Johnson Fleming has produced a checklist outlining every step that needs to be taken when preparing for auto-enrolment.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I hope investors take ‘guaranteed’ wiht a grain of salt as the guarantee is only as good as the company backing it.

    Just like my ginsu knives are guaranteed for life…

  2. Paul Standerwick 2nd August 2011 at 11:44 am

    What a total waste of time, who is this guy trying to impress?

Leave a comment