Study finds flaws in 'traffic light' labels on financial products model

clock • 2 min read

Financial products carrying a ‘traffic light' labelling system to represent some of their attributes - such as historical average return - would create a false sense of security among investors, a study has concluded.

Consumers who were previously deterred from purchasing a product because of the variance in potential return were more inclined to buy it when that variance was also illustrated by a colour, the study by scientists from Munich and France suggested. Since 2013, all UK supermarkets have used a 'traffic light' system to represent nutrition and this study, from the Technische Universität München (TUM) and the French National Institute for Agricultural Research (INRA), examined whether a similar model could be adopted for some financial products. Some 250 German test participants were aske...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Regulation

FCA's SDR regulation will 'make advisers sit up and listen'

FCA's SDR regulation will 'make advisers sit up and listen'

‘There has to be a fundamental re-educating of the adviser community’

Isabel Baxter
clock 30 November 2023 • 4 min read
Advice/guidance boundary review will help 'bridge advice gap'

Advice/guidance boundary review will help 'bridge advice gap'

The FCA’s latest update leads to mixed reactions from the industry

Sahar Nazir
clock 04 August 2023 • 4 min read
FCA review confirms investment pathways working 'as intended'

FCA review confirms investment pathways working 'as intended'

No changes to initiative but industry called to better support savers

Holly Roach
clock 12 July 2023 • 3 min read