Capital protected structured investments
Do you deal with customer complaints about capital protected structured investments?
This page will give you an overview of the complaints we deal with and how we approach them.
On this page
Do you have an investments complaint?
If you’re a consumer, see our investments guidance for consumers. Or give us a call on 0800 023 4567.
Complaints we deal with
People usually bring complaints to us when they're unhappy with the performance of a product or the suitability of advice given. For example, they might tell us:
- they wouldn’t have invested in the product if they’d known the return would be as low as it was
- the literature your firm provided wasn’t clear
- your firm didn’t explain the risks properly
- the product wasn’t suited to their circumstances
- the sale was suitable, but the amount invested was too high
Rules on capital protected structured investments
Just because the capital was protected on maturity doesn't automatically mean that the advice was suitable. The product carries the same risk as the underlying index, except that the capital is protected.
Even though the capital is protected, the return is usually linked to some indices, or a basket of shares, whose performance can fluctuate. The risk exposure is therefore similar to investing directly in the asset classes the indices represent.
You should take into account:
- The Principles in the FCA Handbook, and
- if you're giving advice, the rules on suitability in COBS 9A.1 Application and purpose
Even if you didn’t give advice, you should still be mindful of the COBS 4.2 Fair, clear and not misleading rule.
Handling complaints on these investments before they come to us
Good complaint handling can repair a relationship, help build trust and confidence in financial services, and give customers a better understanding of your financial products.
You should ensure your complaint handling teams fully understand:
- The requirements of the Consumer Duty
- What to send us when we're dealing with a complaint about your firm
Our decisions database holds all the final decisions we’ve published since 1 April 2013. They're anonymised to protect the identity of complainants but are based on real-life complaints, so will give you a good picture of how we resolve disputes.
Our complaints data will give you an idea of the volume of complaints we receive and resolve, and the proportion that we have upheld in consumers’ favour.
How we resolve capital protected structured investment complaints
We only look at complaints you've had an opportunity to look into first. If the consumer is unhappy with your decision, or you don't respond to them within the time limits, they can come to us.
Each case is different, so what we require will vary, but we’ll look at the facts and evidence from both you and your customer. What we consider will usually include:
- relevant laws and regulations
- regulators’ rules in place when the event happened, including the Consumer Duty
- guidance, standards and codes of practice in place at the time of the event
- the customer’s investment experience
- whether the customer understood there was a risk they’d get little or no return
- whether you adequately explained the risks – it's not usually enough just to refer to the sales literature
When we begin to investigate a complaint, we'll ask you for information and evidence. Each case is different, so what we require will vary but will usually include:
- the ‘fact find’, that is, information gathered about the customer’s circumstances
- the attitude to risk questionnaire
- the suitability letter
- meeting notes
- illustrations
- the application form
- policy schedule or investment certificate
- key features
- terms and conditions
- fund fact sheet
- statements
- charges or fee structure document
- contact notes and correspondence, especially where the customer is considered vulnerable
We follow the FCA’s dispute resolution rules (DISP) and will take into account how you’ve tried to put things right. We’ll also consider whether the sale was by a 'tied' representative of a product provider, or an independent financial adviser.
If we uphold a consumer's complaint, we'll tell you what you need to do to put things right.
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Consumers sometimes tell us they’re unhappy with the returns from the investment and say you gave them misleading information at the point of sale. In these cases, we look at several factors, including:
- whether the customer wanted capital protection
- the customer's attitude to risk
- the customer’s investment objective
- how much the customer could afford to invest, excluding setting aside money for emergencies and other requirements
- whether the customer could afford to lock up their capital
- where the investments were made
- if the customer understood the way the product worked
- whether the customer had invested in similar products before
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We’ll consider whether:
- the risk was appropriate for the customer and whether
- they understood the risk
It may be that the product was too risky for the customer. Sometimes however, we find the customer wasn't looking for capital protection at all. They might have taken some risk for the chance of higher growth. And they found themselves tied into this product for a few years with the potential for little or no return.
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Sometimes we find that, although the sale was suitable, it was unfair to lock in so much of the customer's funds to a single investment. Even if we believe the product was suitable and the proportion reasonable, we’ll need to consider:
- what you did to ensure the customer understood how the product worked
- whether you made the inherent risks clear to the customer
We might be able to tell that the customer didn’t understand how the product worked. And we might believe they wouldn’t have chosen it – or may have only invested a small amount – if they’d realised:
- that the way it worked was so complex
- there was a high risk of obtaining little or no return
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When checking whether this was a good investment for the customer – compared to other available options – we’ll consider:
- that a higher or additional-rate taxpayer would pay 40% or more of the return in tax, and
- whether you made this clear to your customer
If you sold the product to a non-taxpayer, we’ll whether their decision to invest would have been different if they’d known the tax implications. For example, they might not have chosen this investment if it pushed them into the basic rate tax bracket.
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If the customer surrenders the product before maturity, they may not get all their capital back – even though these investments are designed to return the capital on maturity.
We’ll check the fact find and other information to see if it was clear the customer might need their capital before the end of the investment term.
If we believe this was clear, we’ll look into whether the advice you gave them was suitable, given they ended up paying surrender penalties.
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If you tell us that the customer bought the investment on a non-advised basis, but they say they received advice, we’ll investigate to find out exactly what happened.
To do this, we'll look at whether you led the customer into buying the product in any way, by examining:
- the circumstances under which the sale took place
- the available evidence from the point of sale
If we decide you did provide advice, then you’re responsible for making sure that advice was suitable. We’ll investigate whether you fully explained the product and based your recommendation on the customer's circumstances.
Each complaint – and therefore what we need to consider – is different. For example, if the customer complains that you gave them misleading literature, we’ll look at:
- their reasons for saying so
- the complexity of the product, and
- whether they had enough experience to understand the literature
We’ll also study the literature to see if it clearly explains:
- how the return is calculated
- the maximum potential return
- features like averaging, management strategies and the impact of these features on performance
- the risks carried by the underlying indices
- what happens at the end of the term
- any charges or surrender penalties
Case studies
Antonio is unhappy with his bank’s investment advice
Investments Banking
Deborah feels her adviser should have explained her investment options
Business Support Hub
Businesses and consumer advisers can contact our Business Support Hub on 020 7964 1400 for information on how we might look at a particular complaint, or for guidance on our rules and how we work.
We also work with businesses and other organisations to help prevent complaints.