Regulator warns risk-rated funds may not match risk profiles

clock • 4 min read

The Financial Conduct Authority (FCA) has warned advisers over using risk-ratings for clients and subsequently investing them into risk-rated funds.

Speaking at the Defaqto investment outsourcing conference on Tuesday, technical specialist at the FCA Rory Percival flagged up problems with determining client risk tolerance, which the FCA is alarmed about, particularly when the risk level is defined by just a number. Clients find it difficult to understand what level of risk they are taking on without any description of what the number means, Percival warned. He said the regulator found very few risk descriptions which were good in its latest thematic review into the issue. Using the measure of volatility, for example, he said, is m...

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