The FSA is reported as having said its research has revealed that much promotional material for structured products does not adequately explain the risks associated with investing in them. Fair enough. This is followed by assorted yet frustratingly unspecific platitudes about improving marketing literature.
But the FSA does go so far as saying that if consumers are not getting personally tailored advice, then an adequate explanation of risk is particularly important as they will be relying solely on the literature they receive. Fine. There is only one source from which such advice may be obtained – an IFA, for the simple reason that personally tailored advice is what good IFAs are best at providing.
The very structure of many structured products is complicated and no amount of additional text can be guaranteed to clarify exactly the balance of risk reward that they involve.
A better solution might be to disallow the direct sale of such products so that consumers would not be able to invest in them without having taken personally tailored advice. They could still be marketed direct to the world at large but with the proviso that no application will be accepted other than through a fully regulated IFA.
Misbuying would be all but eliminated and someone would be clearly responsible for any misselling. How many regulatory personnel does it take to change a light bulb? Evidently, still rather too many.
Julian Stevens WDS Independent Financial Advisers, Kingswood, Bristol