But the Financial Conduct Authority has expressed concerns about the use of risk-rated funds, reminding advisers they should not be used as a short-cut to determine investment suitability.
The regulator was particularly worried about how advisers map client risk profiles to suitable funds.
With funds tagged ‘risk-rated’, ‘risk-targeted’ and ‘risk-managed’ these days, this guide explains how these different propositions work, what investors can expect from such funds and how advisers can avoid the wrath of the regulator when recommending such vehicles.
Contributing material was provided by: Anthony Gillham, portfolio manager of the Old Mutual Voyager Strategic Bond fund; Patrick Connolly, Certified Financial Planner at Chase de Vere; Lorna Blyth, investment marketing manager of Scottish Life; Martin Bamford, Chartered Financial Planner and managing director at Informed Choice; and Michael Holland, managing director of FE.