'Better understanding of financial risks' is needed

Consumers need to achieve greater understanding of the risks involve in financial savings and investments, according to the results of a recent survey.

A poll conducted by the Financial Services Consumer Panel suggests that consumers desire a "consistent approach" when having risks associated with financial products explained to them.

This was paired with the observation that most members of the public’s understanding of the details of financial products was low.

John Howard, chairman of the Financial Services Consumer Panel, said: "Most consumers cannot hope to make a sensible decision about buying a financial product without understanding the risks involved.

"The evidence suggests that few consumers do understand the risks, so we believe a practical system of explaining risks which also promotes understanding is a fundamental requirement."

Panel members say that while many investors understand the relationship of risk to reward, few comprehend more complex relationships such as risk to capital.

In March, the organisation welcomed new proposals from the Financial Services Authority regarding the Financial Services Compensation Scheme, which it suggested made the scheme more robust and efficient in its support of consumers.