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Investment advertising not always ‘true to label’: ASIC

ASIC
Aidan Curtis
08 May 2020 — 1 minute read

The corporate watchdog has warned consumers of a surge in marketing around fixed-term investment products being compared to bank term deposits.

ASIC has cautioned consumers to take care before making investment decisions based off of fixed-term investment product advertising which claim to be term deposit alternatives or substitutes.

The regulator said it is monitoring such marketing and the entities involved as consumers have invested large sums of money as a result of the advertising.

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“ASIC views these investment products as riskier than term deposits because they may be issued by entities that are not well capitalised, not protected by the government’s Financial Claims Scheme, and not supervised by the Australian Prudential Regulation Authority (APRA),” ASIC said in a statement.

“Some are also backed by concentrated portfolios of higher-risk unlisted and illiquid assets.”

ASIC deputy chair Karen Chester advised that any investment products offering higher returns than a term deposit were more than likely higher risk.

“In the current uncertain and volatile markets, higher-risk investment products are, more than ever, not for everyone,” Ms Chester said.

“Especially for smaller investors, be they retail or wholesale, when they are not investing as part of a diversified portfolio.

“Be wary of investments that claim to be ‘like’ a ‘term deposit’. Products spruiking even a 2 or 3 percentage point higher return than a term deposit represent significantly higher risk.

“We are also seeing products offering only marginally higher returns with much higher risk profiles.”

According to Ms Chester, investment products marketed towards consumers should be “true to label”.

“Products should not be marketed as having features like low risk of loss, regular returns or easy access to withdrawals unless the product issuer has reasonable grounds to believe they have and will continue to have such features through the economic cycles,” she said.

“Product issuers need to ensure broad statements in their product marketing reconcile with the fine print in any offer document.

“When choosing an investment product, carefully assess if the product is appropriate for your circumstances, particularly when comparing relatively low-risk products such as bank term deposits with other higher return and thus higher-risk investments.”

ASIC said it recognises many consumers are seeking higher and regular returns on their investments during this time of low interest rates and market volatility, but they should know the differences between bank term deposits and fixed-term products.

“If in doubt, seek independent financial advice,” Ms Chester said.

Investment advertising not always ‘true to label’: ASIC
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