The Treasury have issued proposals whereby anyone who is worth £250,000 or more and chooses to invest in unlisted shares in companies may have no investor protection or compensation rights. They will be deemed as "experienced investors" and deemed to have enough knowledge themselves to decide on the risks of whether to invest or not.
This has raised concerns with consumer groups given that many homeowners are worth more than just this £250,000 with their main property alone. This could still mean that they are in-experienced even though they are deemed wealthy enough to have experience.
Our view
Already, financial advisers are required to categorise investors as Private Clients, Intermediate Clients (deemed to have some experience and less investor protection) and Market Counterparty's (no protection) although this has to be agreed in writing with the client.
This move seems yet another to require investors to start to take some responsibility themselves for actions rather than always blaming the adviser or claiming on compensation funds or professional liability insurances. There are many that have suffered through mis-sold investments but likewise there are many that understood the risks on day one but have still been compensated when perhaps they should not have been.
We do not necessarily welcome changes that weaken an investors protection so drastically - but certainly enforcing rules that mean a potential investor has to take a more active role in their investment would be beneficial.
E.g. Our suggested rule: No investor protection if you do not have a formal review of your investments at least once a year. You cannot blame your financial adviser if you refuse to see them or pay them to review you investments.