"Providers can help cull Mickey Mouse products" "Providers can help cull Mickey Mouse products"

18 Jan 2017 Ken Davy

When I picked up my recent copy of Financial Adviser, I thought I must have slept through a few months and woken up on 1 April.  Here was news of a company indicating, although not quite promising, annual returns of 20 per cent through a system that has been "back-tested" to scientifically support its apparent expertise.

By coincidence, I am visiting Disneyland in a few weeks’ time, but even there I am confident that even such a fanciful character as Mickey Mouse would not have the gall to try to promote such wacky-sounding products as these appear to be.

It is deeply worrying that it seems perfectly legal for a company to produce and promote these carefully worded assertions. I cannot imagine any financial adviser touching them with the proverbial barge pole. However, like every profession, there are some bad apples.

This should serve as a timely reminder to HM Treasury and the FCA that there is a vital need for the significant involvement of providers in the revised funding of the FSCS. It is down to them, or perhaps, more practically, the Association Of British Insurers, to identify risky or doubtful propositions before they are foisted on consumers.  

This would focus the minds of actuaries and investment managers on the risks behind products that threaten to over-promise and under-deliver, sometimes resulting in huge liabilities being palmed off onto the FSCS.

I am not advocating a veto on new or creative products, quite the reverse. What we need to see is a system that prevents the abuse of our strong and reputable marketplace and its institutions by those who seek to manipulate it for their own ends.  Just a few years ago, full-page adverts featuring a lightly clad lady eating grapes was used to extol the virtues of what were fundamentally flawed claims of investment expertise and returns. These so-called 'investments' subsequently cost the FSCS, and advisers who currently have to pay the levies, many millions of pounds.

I have also back-tested a system, the results of which show you will instantly double your investment 50 per cent of the time. All you need is a coin and the ability to shout heads or tails and you are in. A slight snag is that the other 50 per cent of the time you will lose the lot, but hey, you can not have everything, can you?

Ken Davy is chairman of Simplybiz


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