The Financial Ombudsman Services received 200 complaints over the mis-selling of stocks and shares ISAs in the last year, compared with only 75 the year before, Moneyfarm said. The trend fans concern that some financial advisers and fund managers could be misleading clients over the nature of the investments that they are making through their ISAs.
Complaints include that ISA providers or financial advisers exaggerated the expected returns of the ISA or deliberately played down the risks involved in a stocks and shares ISA.
Data previously provided to Moneyfarm by the FOS also showed there has been increasing concerns over the level of risk taking by ISA fund managers. The number of complaints relating to excessive risk taking by ISA providers rose from 280 in 2014 to 467 in 2015 – a 67% increase.
“Most people who invest in ISAs do not want to take on excessive risks, said Paolo Galvani, chairman and co-founder of Moneyfarm. “However, the UK fund management industry still has too much of a concentration in UK equities which leads to excessive volatility and poorer returns. It is a concern if the incidences of ISA mis-selling are rising,” he added.
Many of the large losses made by fund managers are caused by their failure to properly stress test their portfolios, in Galvani’s view.
“While Moneyfarm stress tests its portfolios against hundreds of different scenarios- like a sudden rise or fall in property prices or interest rates - many fund managers do little or no systematic stress testing,” he continued.