When you think of an investor, you might think of a high-flying business person. You may imagine someone living in an urban environment, with a successful career, perhaps even a penthouse and a glamorous champagne lifestyle. These are the people, you might envisage, who are most likely to be mis-sold an investment product.
If you think that, the reality should surprise you. According to a recent study we carried out, as well as figures from independent financial regulators, it’s financially comfortable seniors with younger families and pre-retirement couples who have submitted the highest number of compensation claims for mis-sold investments.
Secure seniors make the most claims
Our findings are taken from a Mosaic report we carried out on our clients. Mosaic categorises people into groups based not just on their income levels or socio-economic status, but their values and aspirations too. It’s a form of demographics research that tries to understand people’s lifestyles.
The report showed that the ‘Senior Security’ group made up over 14% of all our mis-sold investment claims, the largest by a considerable margin. The biggest sub-group within this category were “peace-seeking seniors appreciating the calm of bungalow estates designed for the elderly”.
Another group, titled ‘Vintage Value’, were also high on the list, comprising 9.8% of claims in total. In contrast to the more affluent Senior Security group, this group features seniors living in value homes and retirement housing.
Why have these groups submitted the highest number of mis-sold investment claims? It may be because many retired people are actively seeking ways in which they can make their accumulated savings financially productive for them in the future. Unfortunately, while some in the former group may be able to weather the aftermath of losing their funds, the latter may suffer significantly as a result of purchasing an investment that wasn’t suitable for their needs.
Figures from the Financial Ombudsman Service (FOS) confirm that a quarter of all people who submitted a complaint to them regarding mis-sold investments in 2014/15 were over 65. Our own figures show the average age of clients for whom we have successful claims is just under 65.
The unexpected result: affluent families
Interestingly, it isn’t just these two groups who have been hit hard by investment mis-selling. Two further groups for whom we’ve pursued a high number of mis-sold investment cases are the ‘Suburban Stability’ group and ‘Aspiring Home-Makers’.
Those in the former group are generally aged around 45 to 60 and feature mainly couples whose children are grown up, along with financially comfortable pre-retirement couples. The second group are young aspiring singles or families, who already have comfortable homes and are looking to progress financially in life.
With money in savings, investing is an attractive option, especially for families whose funds are intended to help their children in the future, paying for college fees or a deposit on a first home, for instance.
Again, figures from the FOS confirms this: they report that 65% of all final-stage complaints to them in 2014/15 came from people between the ages of 35 to 65.
What about the wealthy business person?
Contrary to stereotype, the high-earning, ambitious ‘City Suits’ group only made up 0.8% of all our mis-sold investment claims.
Unsurprisingly, ‘Rental Hubs’ (Students, young renters and motivated singles) are also low down on the list, comprising only 2.5% of all our cases. Indeed, the FOS reports that just 1% of all complaints to them were made by under 25s.
Conclusion – the nature of investment products
These results say much about who investment products are actually designed to attract. Rather than promising significant sums of money for an opulent lifestyle, many products instead respond to emotional desire – the desire to have a comfortable retirement, or the desire to provide for the family.
If the product is suitable for the investor, then this is achievable. But if the product is totally unsuited to the individual’s needs, then it’s unlikely to yield any return, and may even lose money, destroying the investors’ carefully laid plans for the future. That’s the real cost of investment mis-selling. If you are concerned you have been mis-sold in an investment read our guide on Was I Mis-Sold My Investment? to find out more.