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Alan Stokes, head of investments at Lawrence House, said advisers had been “seduced” by new ideas and strategies without realising the potential consequences.

“Recent events truly highlight a concern we have had for some time, namely many advisers and investors failed to understand what they had been buying."

Mr Stokes said knowledge of the basic principles of investing in real assets had diminished following a rush by some advisers to invest in multi-strategy portfolios they knew little about.

“Many of us have been managing ‘multi-strategy’ portfolios for years, combining fixed income, equities, property and cash, so the concept is not new,” he said. “However, we always knew what we owned.”

He warned many investors had recently found their investments in structured products and ETFs had “all but disappeared”.

Structured products have been at the centre of controversy recently after concerns were raised over plans backed by Lehman Brothers and AIG, with some advisers being warned to avoid proposals backed by the embattled financial giants.

Mr Stokes said advisers who had been in the industry for many years generally made limited use of new financial instruments as a way of preserving clients’ capital.

He said this approach had allowed it to steer clear of non-transparent “instruments of mass destruction”, such as Barlow Clowes gilt plans, split cap investment trusts, TMT stocks and hedge funds.

“We all have a responsibility to our clients and investors, and a major part of that is always understanding fully what we are buying,” Mr Stokes added.