Beware of structured products – keep investing simple

Structured products are not a good idea for investors. Simpler products will often do a better job - and they'll be cheaper too.

Santander is back in the headlines for all the wrong reasons. Having been voted the worst bank for customer service by Which? and Moneywise in 2010/2011, it's been hit with a £1.5m fine from the Financial Services Authority (FSA). The bank told customers that certain products were covered by the Financial Services Compensation Scheme (FSCS) when they weren't. This matters: the FSCS pays out up to £85,000 if a product is covered and the provider goes bust.

The interesting thing here is that the FSA concedes that the products were not mis-sold in the sense of being unsuitable for the buyer nor did investors suffer any financial loss as a result of Santander's failings. The mistake was suggesting FCSC cover might apply when it didn't. The fact that the bank updated its product literature a year after customers started querying the level of cover cut no ice with the regulator, since the position was ambiguous at the point of sale. So what lessons can investors draw from this latest FSA move?

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