You do not need to look far in the investment world to find complex products that promise the earth but leave retail customers worse off.
The Financial Conduct Authority (FCA) has now signalled that contracts for difference, or CFDs, remain high on its list of concerns after a review found some providers falling short of the Consumer Duty.
The duty, introduced in July 2023, was meant to usher in a higher standard of consumer protection.
There were signs that parts of the industry have tried to keep pace, with some firms paring back their fee structures and stopping inexperienced investors, who might not be able to stomach heavy losses, from trading CFDs at all.
Even so, the FCA says there is work to do. The review found firms were not always factoring in customer complaints or satisfaction when judging whether their products offer fair value.
Others appeared to have made minimal changes to their services in response to the new regime.
Charges were another sticking point. Overnight funding fees varied widely, often without clear justification or adequate disclosure. In some cases, providers charged overnight fees on both sides of matched long and short positions, creating potentially large ongoing costs with little obvious benefit for clients.
The regulator says it will follow up directly with the firms in the sample and is weighing further action to tidy up the sector. Firms and individuals who continue to fall short can expect consequences.
As Mark Francis, director of sell-side markets at the FCA, put it: “The Consumer Duty raises the bar for consumer protection across financial services and CFD providers must meet those standards.
"CFDs are complex, risky products and it is vital that providers act to deliver good outcomes for customers, communicate clearly and provide fair value. It is also important that consumers shop around and ensure they fully understand the investment and its costs.”