The beginner's guide to investment Your rights as an investor
When you invest your money with a firm and they are authorised by the Financial Conduct Authority (FCA), you get significant protection if you're not happy with the service you’ve received.
Authorised firms must have formal complaints procedures and belong to the Financial Ombudsman Service (FOS), which resolves disputes between a firm and its customers.
As a last resort, if an authorised firm goes bust owing money to its customers, there is a compensation scheme in the UK that may step in and pay compensation.
Making a complaint through the FOS
If you have a problem with a financial product, service or advice from an authorised firm, first complain to the firm involved. It is obliged to acknowledge your complaint within four weeks (30 days) and must resolve your complaint within eight weeks.
If you have not had a response within this time or the complaint has not been upheld, you can take your case to the FOS. The ombudsman can order a firm to put matters right, including awards up to £100,000.
If you're unhappy with the ombudsman’s verdict, you can bring a court case against the firm. However, this can be time consuming and a costly experience, whereas going to the FOS is free and requires no legal representation.
Claiming compensation through the FSCS
If you've lost money because of an authorised firm’s dishonesty or negligence, normally, you'd seek compensation through the firm (using FOS if your complaint is not originally upheld). But your chances of getting money from the firm evaporate if the firm goes out of business.
In that situation, you can make a claim through the Financial Services Compensation Scheme (FSCS), which might refund some or all of the money.
The FSCS pays compensation of up to £50,000 per person per firm.
Remember, investment risk isn’t covered
In general, the law and the FCA rules do not protect you from investment risk. It’s in the nature of many investments that you might lose money and that is a risk you accept in return for the potential of a higher return.
So if your investments have lost money, you cannot raise a complaint about the performance (unless you have evidence of mismanagement or negligence).
However, if you take advice on your investments and the adviser failed to make sure you understood the risks you were taking, you might have a valid complaint if you lose money as a result.
This highlights another important reason to take independent financial advice when deciding to invest. Not only will you lessen the risk of making inappropriate investments by seeing an adviser than you would on your own, you also receive an extra layer of protection if the recommendations you get are not right for you.
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.