Research and understand the risks before investing your cash
With the economy improving and some consumers being in a position to invest, the Banking Ombudsman Scheme has published
a quick guide on investing. The guide is based on the Banking Ombudsman’s insights from the global financial crisis and
is designed to help consumers avoid making similar mistakes.
“Listening to affected customers during the GFC, it became clear that many thought investing through a bank – no matter
what the product was – was risk-free or close to it. The reality is that no investment is without risk: even term
deposits carry a degree of risk,” says Banking Ombudsman Deborah Battell.
“Customers can be surprised to learn that they are ultimately responsible for making the decisions about which products
to invest in. Financial advisers do just that – provide advice. They do not guarantee you will always make money.
“Customers must therefore research the options and products available, read the information provided about recommended
products and tell advisers about acceptable levels of risk and how long they want to invest for.
“For first-time investors this means familiarising yourself with the finance sector. If you want to make good investment
decisions, talk to people you trust who are experienced investors and research the options.
“This may not stop you losing money due to market fluctuations, but it may save you from investing money you cannot
afford to lose in high risk ventures,” Ms Battell said.
On the other hand, financial advisers – including those employed by banks – also have obligations to customers.
Under the Financial Advisers Act, advisers must not mislead customers, they must ensure their recommendations meet the
customer’s risk profile and objectives, and they must have gone through a robust investment advisory process.
ends