Why regulation isn’t the only way to monitor how your money is managed

It was a tough 2019 for the Financial Conduct Authority (FCA).

The City watchdog received criticism for its slow response to several issues such as the freezing of withdrawals on the Woodford Equity Income Fund and the collapse of mini-bond provide London Capital & Finance.

It is trying to be more proactive this year.

A ban on the marketing of mini-bonds to ordinary retail investors was introduced this year and the watchdog has been looking at issues surrounding illiquid assets in open-ended funds.

One of the aims of the FCA is to protect consumers from financial harm but there are also steps you can take yourself to monitor how your money is managed.

It is important to understand what you are investing in. If you need easy and quick access to your money then putting funds into the stockmarket may not be the best strategy in the short-term.

Similarly, don’t just chase high rates. If something looks too good to be true then it most probably is. If you are promised double digit returns on an investment then there is likely to be a high element of risk so it is important that you understand and can cope with that.

Whatever the rate of interest or risk, understanding the various financial products on offer can be complex and it is not just the product that is important.

You need to understand what you are investing for, how much you are comfortable losing and what the risks are.

Ensuring you are using a regulated firm is an essential first step and you can check this on the Financial Services Register but due diligence is also important so you know how your hard-earned money is being used and how your returns will be generated.

If you don’t have the time and capacity to do your research then a financial adviser can be on hand to help pick and explain the most appropriate products but more importantly develop a financial plan to set goals and keep you on track.

This means you ultimately get both an adviser and the FCA on your side as you embark on your financial journey.

• HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen
• The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested
• Past performance is not a reliable indicator of future performance and should not be relied upon