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Tillinghast urges FSA to take risk/ reward approach

Tillinghast is lobbying the FSA to introduce projections that better illustrate the risk/reward profile of different asset mixes to consumers.

The firm, part of the Towers Perrin group, is calling for greater use of stochastic modelling to project the relationship between the risk and reward associated with different asset mixes and investment strategies across a range of products.

By consulting on how best to take projections forward, the FSA has accepted its current method is something of a one size fits all approach.

Tillinghast principal Bruce Moss says to secure more realistic and simpler projections for consumers the regulator should introduce stochastic modelling which can better take account of different products characteristics and the timeframes over which they are looking to invest. This approach is also well suited to lifestyling.

He argues the FSA’s current approach is better suited to projections that compare the effect of charges on returns and preventing investor confusion with investment returns and other product features.

Moss says: “Stochastic modelling techniques might sound sophisticated and inaccessible but the results of varying investment decisions can be illustrated very powerfully and so help investors develop a better understanding of the relationship between the risk and reward of different investment strategies and the actions they need to take in order to achieve their financial goals.”

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