Many have been attracted to billboards and adverts claiming to offer a lucrative investment opportunity that is guaranteed and protected.

But beware, because according to the financial services watchdog the words ‘guaranteed’ and ‘protected’ have been used “loosely” by some practitioners.

In its annual report for 2014 the Consumer Complaints Unit at the Malta Financial Services Authority said investigations into complaints had shown the two words were often used to describe the resilience of savings products.

Some intermediaries seem to abuse the trust that is placed with them by bona fide savers

And in a post-crisis environment that still sees bank interest rates at historic lows, investors may be blinded by the lure of high interest investments, the unit warned. The unit said the challenge faced by retail consumers was that many financial products were complex and structured in a way which made them difficult to understand.

But the unit added that investors may have also lost focus of the inherent risks associated with service providers, possibly because of the geographic and economic environment in which the issuers operated. “The principle that potential return rises with increased risk is widely known, but many investors might underestimate the risk of default if the investment is designed in a manner which could lead to a false sense of security in regard to the issuer’s financial position,” the unit said.

The problem increases when investors cannot afford to lose their capital since this would constitute a substantial part of their portfolio. While many consumers can go the extra mile to find the ideal investment with a better return on their lifetime savings, the unit cautioned that some financial services providers were becoming innovative in an attempt to increase their market share.

This sometimes happened at the expense of consumers’ best interests, the unit said.

“Circumstantial evidence seems to suggest that at times some financial intermediaries continue to abuse of the trust that is placed with them by bona fide savers.”

It also noted that some financial products, paying lucrative upfront commissions to intermediaries, were sold widely even if they were far from appropriate for retail investors. “Such behaviour tarnishes the reputation of the sector and erodes the confidence which consumers ought to have in the system,” the unit said.

It insisted that upfront commissions received by service providers gave rise to conflicts of interest.

However, the unit also acknowledged that some consumers opted to take risky chances with their hard-earned savings. “Others may be influenced by greed or other irrational behavioural traits which often lead them to make wrong decisions.”