Chairman of the FSA, Howard Davies, has chastised IFAs who are touting guaranteed double digit ...
Chairman of the FSA, Howard Davies, has chastised IFAs who are touting guaranteed double digit risk-free return to their clients.
The comments were part of speech Davies delivered yesterday to urge businesses and individuals to recognise the economic world is changing with low inflation likely to persist.
Speaking at the CBI Southern Region Annual Dinner, Davies said:
"We can expect, I believe, a continued period of low inflation and perhaps a slow recovery. In those circumstances, it will be important for companies to be realistic and not to build plans for the future on the expectation of double digit growth in revenues.
"Tempting offers from salesmen of 'guaranteed' double digit returns, from with-profit bonds, hedge funds, or highly leveraged investment trusts - perhaps of the split capital variety, offering separate income and capital shares, are damaging. The income projections sound attractive, but the risks on the capital side are not so prominent in the sales pitch."
Davies insisted in current markets there is no such thing as a double digit risk-free return and was surprised at 'how many people seem to forget that when they clip a coupon in the Sunday papers, or have lunch with their broker or financial adviser'.
Davies added: "Just now there are many financial engineers around who are keen to pretend that they can beat the market, and provide boom-time returns in a downturn. It just isn't possible, without taking big risks."
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