FSA warns advisers don't understand ETF risk

The regulator says the warning in its Retail Conduct Risk Outlook (RCRO) paper comes on the back of increased retail use of ETFs and after a rapid change in the product's complexity. Its disquiet appears to stem from the development of the ETF structure, alluding to the appearance of leveraged and inverse funds, those using active management, and synthetic replication. The report stops short of identifying any one of these strategies as unsuitable or risky, but refers more vaguely to the challenges of understanding "complex ETFs", compounded by retail investors and advisers lacking fa...