Do you have the right to buy investments that will lose you money?

New Consumer Duty rules put the onus on financial firms to avoid foreseeable harm to people. But how far should harm prevention go?

For investors, foreseeable harm could mean buying fund where the fees are likely to outweigh what you'll make in returns.

Investment platforms that offer these poor-value funds now face a difficult decision between warning customers or removing them from sale entirely.

We asked the leading platforms what customers can expect and we also explain how you can spot a poor-value fund.

Which platforms are restricting funds?

Aviva, Barclays Smart Investor, Fidelity, HSBC and Interactive Investor said that they’d restrict consumers’ access to funds if they considered it necessary – for example  if they weren’t delivering enough value. 

Charles Stanley Direct said that it would only allow poor-value funds to be bought over the phone, without the usual additional phone dealing charge.

For some of these platforms, such as Aviva, this policy is still very new and so no funds have been restricted yet.

Interactive Investor told us: ‘Of funds currently restricted, the vast majority are because the manager itself has said it was not value for money and these are overwhelmingly low-demand funds.’

Only Fidelity publishes the names of the funds it has placed restrictions on and has been carrying out this practice since before the rules came in. Since September, its customers haven’t been able to buy new shares in the Migo Opportunities Trust.

• Find out more: best investment platforms.

What else are platforms doing to protect customers?

Not every platform wanted to restrict funds, with some considering this a step too far into consumers’ freedom to choose what to invest in.

AJ Bell and Hargreaves Lansdown are alerting customers who are invested in poor-value funds, but aren’t removing the funds from the platform or preventing further investment.

Mona Christensen, head of client and product outcomes at Hargreaves Lansdown, said: ‘Our clients tell us that choice is very important to them and it would be wrong to deny them the ability to choose.’

 Some newer ‘select list’ platforms, which only offer a few investments, told us these value assessments were built into the selection process. Moneybox , Plum and The Big Exchange all said that they perform value-for-money checks when choosing which funds to list and then conduct regular reviews. 

InvestEngine told us that as it only lists low-fee exchange-traded funds and it doesn’t have a platform charge, it's confident in its value for money and isn’t checking each fund.

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Do you own poor-value funds?

The fees charged by funds can eat into your returns, and when these returns are poor they leave you potentially worse off than where you started.

Active funds tend to charge higher fees because you’re paying someone to sift through the market and find those hidden gems that will deliver a lot for your money. But, if that isn’t translating into high returns for you in the long run, you might want to re-examine whether it’s worth paying those high costs.

That doesn’t mean all passive funds will be delivering value – if a passive fund is tracking an excessively specific area or particularly volatile sector such as cryptocurrencies, you might still be at risk of financial harm.

The amount you can expect to pay in fees also varies by sector, so take a look at a collection of some of the most popular sectors below to see if you’re paying over the odds.

Another way to keep down the amount of fees you pay is by choosing an investment platform with lower service fees, you can check our comparison of investment platform fees and charges to see how your current platform fares against its competitors.

Are financial advisers affected by the Consumer Duty?

Beyond investment platforms, financial advisers and fund managers are seeing changes to the way they need to operate so they don't cause any foreseeable harms.

A survey from Royal London and The Lang Cat found that 37% of 160 financial advisers had changed their fee structures after completing fair value assessment exercises.

Similarly, financial advice giant St James’s Place announced it was changing the way it charged its clients in response to the new rules. These changes include removing exit fees for new customers - although at the minute current customers would still be due to pay when they switch out.

Fund managers must also show their funds provide value for money -  an assessment which underpins many of the decisions made by investment platforms. The Financial Conduct Authority considers this process 'crucial' for consumers receiving fair value.

You can complain to a financial firm if you feel they aren’t following Consumer Duty rules, and you can then escalate this complaint to the Financial Ombudsman Service (FOS) if your complaint is unsuccessful with the firm itself.

• Find out more: your rights as an investor

3 steps to check your investments are value for money

1. Check the fees you're paying for funds and long-term returns (eg over 5 years). Could you invest in the same market (such as the US) using cheaper passive funds?
2. How much are you paying your investment platform? Check our investment platform fees comparison to see if you could pay less.
3. Are you paying a financial adviser? How often do you see them a year, and do you really need their help? There are cheaper ways to get financial advice.