How to tell if you were mis-sold an investment
Investments go down as well as up — so when is it mis-selling?
Market losses on their own are not mis-selling. Share prices, bond values, and fund performance all fluctuate, and accepting some level of loss is part of investing.
Mis-selling happens when the way the product was sold to you was wrong — not just the outcome. The FCA's suitability rules require firms to recommend investments that match your:
- Knowledge and experience
- Attitude to risk and capacity for loss
- Investment goals and timescale
- Overall financial circumstances
If any of those weren't properly assessed, or the product clearly didn't fit, there is a potential claim regardless of whether the market turned against you.
Common types of investment mis-selling
Unsuitable risk level. A cautious or first-time investor put into a high-risk product they couldn't afford to lose on. The "balanced" label on a fund doesn't make the investment suitable if it was clearly too risky for the person buying it.
Inadequate risk warnings. The downside was glossed over, described as unlikely, or buried in small print while the upside was emphasised in conversation.
Unregulated or exotic products. Mini-bonds, unregulated collective investment schemes (UCIS), forestry schemes, overseas property bonds, and structured products sold to retail clients who shouldn't have been eligible for them.
Concentration risk. Too much of your savings placed in a single investment or sector, leaving you exposed to one bad outcome.
Pension freedom "drawdown" recommendations. From 2015 onwards, flexible drawdown gave advisers a new set of products to sell — and a new set of mis-selling scenarios, especially where vulnerable or inexperienced clients were put into complex portfolios.
Conflict of interest. The adviser earned commission, platform fees, or other payments that influenced the recommendation — and this wasn't clearly disclosed.
What can you recover?
A successful investment mis-selling claim is calculated to put you back in the position you would have been in if you had received suitable advice. That usually means:
- Reversing the loss on the unsuitable investment
- Comparing it to a benchmark return you would have earned from a suitable investment
- Plus interest on the difference
Where the firm that advised you has gone out of business, the Financial Services Compensation Scheme (FSCS) can pay up to £85,000 per person per firm. Where the firm still trades, claims are pursued directly, with the Financial Ombudsman Service as a fallback if the firm refuses to pay.
Evidence that helps your claim
The strongest investment mis-selling claims are backed by:
- The suitability report or "reasons why" letter from the time of the advice
- Fact-find documents showing what the adviser was told about your circumstances
- Marketing material and key information documents for the product
- Statements showing what the investment did and when you disposed of it
You don't need all of this to start a complaint — firms are required to provide records on request.
What should you do?
If you're holding — or lost money on — an investment that felt wrong from the start, it's worth having a specialist review the sale. The distinction between market loss and mis-selling often turns on what was said and documented at the point of sale, not on what happened afterwards.