The Consumer Panel has published research today which shows consumers would like to have a consistent approach to explaining the risk to their money when buying or investing in financial products, particularly as their general knowledge and understanding of risk is low.

The research was qualitative, and so only provides an initial indication of the need, but it clearly shows that consumers generally do not fully appreciate what risk is; what the potential impact of it is; or how they need to factor risk in to their buying decisions. Most understand the relationship between risk and reward, but few really understand more complex aspects such as the risk to capital (whether only part or all of it), the risk to the reward or the time impact on risk.

John Howard, Chairman of the Financial Services Consumer Panel said:

"Most consumers cannot hope to make a sensible decision about buying a financial product without understanding the risks involved. The evidence suggests that few consumers do understand the risks, so we believe a practical system of explaining risks which also promotes understanding is a fundamental requirement. With the advent of Personal Accounts for Pensions, which will come with a choice of products, a consistent way of explaining risk and a greater understanding of risk becomes even more important and pressing."

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MEDIA ENQUIRIES