Since the collapse of Lehman Brothers in 2008 caused one of the biggest crises the UK financial market has ever seen, there has been a steady trickle of stories about [mis sold investments]
. The financial Services Authority and the Financial Ombudsman Service have had their work cut out keeping up with the claims of mis sold investments, and for many people the impacts are still being felt.
Take Barclays bank, as a random example. It was fined over £7.7 million in 2011 because it sold Aviva funds, which were high risk investments, to over 12,000 people who believed they were getting a low risk investment or for whom the product was completely unsuitable. The fine is just the tip of the iceberg Ė over £60 million has been paid out to those investors so far, while a court cases rumbles on for those remaining who believe that the amount of compensation offered is much too low.
One little reported side effect of the fine for Barclays, and the publicity around it, has been that the number of complaints made to the FSA with regard to mis sold investments has increased by 77% in just a year. Itís reasonable to assume that a similar story will be told by other firms who have been guilty of mis selling, and itís no bad thing when you think about it.
For years, or even decades, the public has been lulled into a false sense of security. Theyíve relied on the banks telling them the truth, and the watchdog organisations like the FSA, and havenít really taken any responsibility for their finances themselves. In many cases it has been a rude awakening, with investors suddenly finding that the offer really was too good to be true, and that they are out of pocket Ė some to the tune of tens of thousands of pounds.
Belatedly, many people are starting to realise that they could have done something to avoid getting into the situation in the first place. Had they done a little research, they may have understood that the product they bought wasnít as risk free as they thought, or that the interest rate promised was not guaranteed, or even that they would be unable to withdraw the investment without a hefty penalty.
While one has to has sympathy for those were conditioned to believe what the financial advisors told them, and have suffered accordingly, there is a new generation of investors who have seen what happened to those who came before them, and they are determined not to fall for the same tricks. They are much more sceptical of the claims made about investment products, and rightly question them or ask to see the evidence supporting the claims. They make sure they fully understood the potential risks and rewards of products before they commit, and if they donít get the answers they seek, they walk away and invest elsewhere.
Forget the regulators and the watchdogs, itís the investors themselves who will force banks like Barclays to act properly, or risk losing business. And thatís exactly how it should be.
If you are concerned about any of the issues raised in this article, then seek independent advice about mis sold investments from advisory websites like the [Money Advice Service]