Investing can be a complex process. It’s not always easy to understand the risks involved.
Investors should be able to trust that the advice they receive is in their best interests. Unfortunately, this isn’t always the case and can leave individuals at risk of financial loss and emotional distress.
Mis-selling occurs when an investment product is recommended that isn’t suitable for the client’s needs, risk requirements, or financial situation. It can also occur when the advice they receive is not in their best interest and vital information is not given, including any costs that will be incurred when taking out the investment.
In this article, we will explore the common types of mis-sold investments, how to identify them and what steps to take if you have been a victim.
Common Types of Mis-Sold Investments
Mis-sold investments can involve a wide range of financial products. Some types of investments are more commonly mis-sold than others and each type comes with its own risks and complexities. Understanding these types can help you avoid falling victim to mis-selling.
Pension Transfers – One of the most common areas for mis-selling involves pension transfers, many people have been advised to transfer their pensions into unsuitable products. High fees, unsuitable investments, and loss of valuable guaranteed income can lead to significant financial loss if investors do not fully understand the risks.
Self-Invested Personal Pensions (SIPPs) – SIPPs allow investors to manage their pension savings independently, offering more control over where their money is invested. However, there have been numerous cases of SIPP mis-selling, especially where investors are advised to place their savings into high-risk illiquid assets (an asset that cannot quickly be converted to cash without a significant loss of value) like overseas property, storage units, or renewable energy projects.
High-Risk Investments – High-risk investments, such as unregulated collective investment schemes (UCIS) or offshore investments, are often pushed onto those who do not have the financial means or experience to handle such risks. These products can offer high returns but come with equally high risks, making them inappropriate for average investors and those for whom losing their money would be catastrophic.
Mini-Bonds – Mini-bonds have recently attracted attention due to high-profile collapses, including Blackmore Bond. These products are often marketed with attractive interest rates but come with high risks. Mis-selling occurs when people are advised to invest in mini-bonds without being made fully aware of the potential for total loss, particularly if the bonds are illiquid or unregulated. Mini-bonds are not protected by the Financial Services Compensation Scheme (FSCS) or Financial Conduct Authority (FCA), meaning if you lose your money to this investment scheme it is unlikely that the FSCS or FCA will be able to compensate you.
Structured Products – Structured products combine different investments to create a single product that offers either capital protection or a high level of return. However, they can be complex and difficult for average investors to understand. Mis-selling can happen with structured products if an investor is not fully informed of the risks, especially if capital protection isn’t as secure as they’re led to believe.
How to Identify a Mis-Sold Investment
Mis-sold investments often come with red flags, and recognising them can help you to protect your hard-earned money. Remember, not every investment scheme is regulated, and even if it is, you could still be at risk.
Some of the most common signs of mis-selling are:
Inadequate Risk Assessment – Before any investment is recommended, a proper risk assessment should be carried out. If the investment does not match your financial goals, risk tolerance, or retirement timeline, it could be a sign of mis-selling.
Lack of Information – If you were not provided with the full details about the investment, including potential risks, fees and charges, this is a red flag. A reputable and regulated advisor should provide a clear explanation of the product, ensuring you understand what you are investing in and the risks you are taking.
Pressure to Invest – Be wary if you feel pressured to invest quickly or are told that an offer is time-sensitive. High-pressure sales tactics are often used in cases of mis-sold investments. It is crucial to take your time to review the product, ask questions, and if you feel it is really needed, seek a second opinion.
Unsuitable Products – Mis-selling often occurs when unsuitable financial products are recommended to investors. This could include high-risk investments for someone nearing retirement or products that don’t align with your personal financial circumstances.
Unclear Communication – If you feel your advisor failed to communicate clearly about the nature of the investment, returns, or risks, this could indicate mis-selling. Make sure all communications, advice and terms are documented.
Action to Take If You’ve Been Mis-Sold
If you believe you have been a victim of mis-sold investments, it’s crucial to act promptly as they can have serious financial implications. You have the right to seek compensation for any financial loss suffered due to a mis-sold investment.
Barings Law can help you claim compensation for the following mis-sold investment products:
Mis-Sold Pensions – Our legal experts have been successfully reclaiming compensation for our clients who have been mis-sold their pensions. If this applies to you, our team can help you reclaim what you have lost on a no-win no-fee basis. For more information, click here.
Alternatively, to start your claim, click here.
Blackmore Bond – Series 1 Bondholders of Blackmore Bond PLC are invited to join a professional negligence claim against Lonsdale Insurance Brokers Limited, the broker which arranged the Capital Guarantee Scheme with ION Insurance Group S.A. (otherwise referred to as CGS).
The claim will seek compensation in respect of Lonsdale’s alleged negligence for placing the CGS with an insurer which was not fit for purpose.
If you are a Series 1 Bondholder that has been affected by the liquidation of Blackmore Bond PLC in April 2020 you may be eligible to submit a professional negligence claim.
For more information about the claim and the partnered firms taking legal action, please click here.
St. James’s Place – Barings Law can help those who have lost money either through advisory fees or investments made on the recommendations of St. James’s Place advisors. For more information, click here.
Alternatively, to start your claim, click here.
At Barings Law, your legal concerns are our top priority. Whether you need guidance on a complex legal matter or have questions about our services, our team is ready to assist you.
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