Consumers are struggling to understand structured products and overestimate the expected returns.

This is the conclusion of a research paper just published by the FCA.

City of London

City of London


They asked consumers to anticipate how the FTSE 100 would grow over time and then, for their expectations for structured deposits linked to the FTSE 100 during the same period.

The results revealed that while consumers’ expectations for FTSE growth were in line with the FCA’s assumptions, they did not match the returns they anticipated on structured products based on the same benchmark. What’s more, on average, returns were overestimated significantly, by almost 10% of the assumed investment amount over five years.

Director of supervision and authorisations at the FCA Tracey McDermott said: “There is a place for structured deposits in the market. But our research shows that many consumers find it difficult to understand how these work and compare them to alternatives. That is why it is crucial that firms ensure the way they design and market these products is driven by the needs of consumers. Our work indicated that this is not always the case.


“For consumers, the message is simple – think very carefully before buying a product if you don’t understand how it works and if you’re unsure, ask for more information or consider seeking financial advice.”

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