Investment ISA providers ‘ignore customer risk profiles’ as complaints soar
There was a 67% increase in the number of complaints relating to ISA providers ignoring their customers risk preference, according to MoneyFarm, a digital wealth management company.
Complaints rose from 280 in 2014, to 467 in 2015 and MoneyFarm is calling on the industry to do more to properly assess a client’s risk appetite and to ensure the investor’s portfolio continues to match their risk profile.
It also suggests that the lack of diversification, a characteristic of many UK investment funds, may be partly behind the complaints.
This is because the risk automatically rises when investments are concentrated within any one market and MoneyFarm added that clients’ exposure to risk is immediately lowered when investments are allocated across multiple, uncorrelated markets.
Paolo Galvani, chairman and co-founder of MoneyFarm, said: “It is imperative clients are only exposed to levels of risk they feel comfortable with.
“Part of the reason why people are under-investing in their pension is that they regularly get burnt by taking risks that they are unaware of.
“When fund managers increase risk on investments above a level clients are comfortable with, this inevitably stores up problems for the future.”