Risk profiling: an inexact science

Last week's FSA fine against Barclays for poor complaints handling comes very soon after its warnings about absolute return funds and the discussion paper on risk profiling tools.

It seems the regulator has learned some lessons from the Lehman collapse – namely to try and anticipate small-scale issues before they develop into significant ones. It is to be applauded for tackling Barclays relatively quickly after inappropriate advice was delivered. It might be argued the advice was only deemed inappropriate by the investors because the value of their investments went down. If there had been a strong equity market and their investments had grown in value they may not have noticed what they had invested in was not quite what they thought originally; in terms of risk p...