No such thing as a “safe” investment

In Financial competency on 21/02/2013 at 6:10 am

Savers looking for ways to earn the kind of income once reliably available from traditional investments, will end up buying “unsafe” products.

Let’s hope the authorities are more vigilant now that the FT that was responsible for products like “minibonds” has moved on. What annoys me is that while MAS found that banks like DBS had failed to appreciate the risks to customers, it only slapped them lightly. In the UK, heavy fines are levied and banks are expected to reimburse customers, even sophisticated ones

.”UBS’s conduct fell far short of what its customers deserved”.

FOR SAVERS, RISKY INVESTMENTS TURN SOUR Americans whose stock portfolios lost money in the financial crisis have turned to speculative investments promoted by aggressive financial advisers – leading to steep losses and accusations of fraud. “Those alternative investments have now had time to go sour in big numbers, state and federal securities regulators say, and are making up a majority of complaints and prosecutions,” The New York Times’s Nathaniel Popper reports. “Last Wednesday, Mr. Galvin’s office ordered one of the nation’s largest brokerage firms, LPL Financial, to pay $2.5 million for improperly selling the real estate bundles, known as nontraded REITs, or real estate investment trusts, to hundreds of state residents from 2006 to 2009, in some cases overloading clients’ accounts with them.”

Brokers promoting bad investments to unsophisticated investors is nothing new. But while the easy prey used to be people looking to get rich quick, the pool has widened to include savers looking for ways to earn the kind of income once reliably available from traditional investments. Regulators are warning investors that the dangers are unlikely to recede, given the Federal Reserve’s pledge to keep interest rates near zero and the push among financial firms to earn more revenue from so-called alternative investments marketed to retail investors.”

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