The FSA also warns that absolute return funds (that aim to deliver a positive return even when markets fall) use strategies that even financial advisers find difficult to understand.
Yet it would seem that it is not just consumers and their advisers that find many investment products a little complicated. So too do providers.
Take structured products ? plans that aim to protect your capital but give you a return higher than a savings account over a defined period of time. Many providers slip the word "guaranteed" onto their marketing literature.
Now it has emerged that Santander has written to its investors to say that it was wrong to label guaranteed growth plans sold between 2008 and 2010, "guaranteed". Why? Because there wasn't actually a cast-iron guarantee that savers' money was absolutely safe.
These "guaranteed" structured products were used to woo interest-rate starved cash investors to its Super Isa paying market-leading rates. Dare I suggest that such customers would not have been sophisticated investors au fait with derivatives and counterparty risk?
The bank now admits: "The fact that the return on your investment or policy was described as 'guaranteed' does not necessarily mean that we can pay you compensation equal to the return you were promised."
As is a matter of course with financial institutions, the Spanish-owned bank doesn't give the impression that it thinks it's done anything too much wrong. It boasts that it is the only provider to have taken upon itself to write to clients, while the rest of the industry still says "FSCS cover may apply" and refers customers to the FSCS's website, rather than clarifying the matter itself.
It argues that it is a highly rated bank that is pretty much safe from insolvency, even hinting that no government would let a bank of its size go under anyway.
All of which misses the point. As we reported last week, one Telegraph reader lost �150,000 because he deemed his money in a similar plan (not one of Santander's) was safe because it was backed by a highly rated bank that went by the name of Lehman.
Santander's conscience is clear because it says that very few people have phoned in to complain, although it admits that "there is a lot of confusion on whether the Financial Services Compensation Scheme covers these types of plan". It makes you wonder that if a financial heavyweight such as Santander can't work out when a guarantee is a guarantee, then what hopes is there for ordinary folk ? let alone Forrest Gump.
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