Invest
Not ‘like’ a term deposit: ASIC delivers risky investment warning
For the second time in two days, the corporate watchdog has delivered a warning to consumers – this time about investment product advertising that isn’t “true to label”.

Not ‘like’ a term deposit: ASIC delivers risky investment warning
For the second time in two days, the corporate watchdog has delivered a warning to consumers – this time about investment product advertising that isn’t “true to label”.

The Australian Securities and Investments Commission (ASIC) is now warning consumers about investment advertising that compares fixed-term investment products to bank term deposits.
In a statement, the regulator said it has seen a surge in such market over recent months – and is cautioning consumers to “take care making investment decisions based on such advertising”.
According to ASIC, fixed-income products are being advertised as term deposit “alternatives” or “substitutes”, and the practice is leading consumers to invest significant sums of money.
Many consumers are currently seeking higher and more regular returns on their investments due to low interest rates and market volatility, but ASIC warned that there are significant differences between bank term deposits, which it considers “relatively low-risk”, and fixed-term funds and debentures offering regular fixed distributions “that are higher-risk investment products”.
The regulator considers bank term deposits relatively low-risk because they are protected by the government’s Financial Claims Scheme, and because banks are actively supervised and monitored by the Australian Prudential Regulation Authority (APRA) to ensure they honour their banking commitments.
Fixed-term investment products are riskier “because they may be issued by entities that are not well capitalised, not protected by the government’s Financial Claims Scheme and not supervised by APRA”, ASIC outlined.
Some are reportedly even backed by concentrated portfolios of higher-risk unlisted and illiquid assets.
ASIC deputy chair Karen Chester has weighed in, noting that “if an investment product offers higher returns than a term deposit, it is more likely than not to be higher-risk”.
“In the current uncertain and volatile markets, higher-risk investment products are, more than ever, not for everyone – especially for smaller investors, be they retail or wholesale, when they are not investing as part of a diversified portfolio,” she said.
She warned consumers to “be wary of investments that claim to be ‘like’ a ‘term deposit’.”
Products spruiking even a 2 or 3 percentage point higher return than a term deposit represent significantly higher risk, according to the deputy chair, who also observed products in the market offering only marginally higher returns with much higher-risk profiles.
“Investment products marketed to consumers should be true to label,” Ms Chester continued.
“When choosing an investment product, carefully assess if the product is appropriate for your circumstances, particularly when comparing relatively low-risk products such as bank term deposits with other higher-return and thus higher-risk investments.”
If in doubt, Ms Chester urged individuals to seek independent financial advice.
“Products should not be marketed as having features like low risk of loss, regular returns or easy access to withdrawals unless the product issuer has reasonable grounds to believe they have and will continue to have such features through the economic cycle,” she outlined.
“Product issuers need to ensure broad statements in their product marketing reconcile with the fine print in any offer document.”
The new warning comes just a day after ASIC said retail investors are playing a “particularly dangerous” game in trying to time the sharemarket amid current volatility.
About the author

About the author


Advice
AMP Australia appoints new CEO
AMP Australia has a new man at its helm, with a former Sunsuper chief executive due to assume the reins this Friday and lead the strategic transformation of its advice and super business. ...Read more

Advice
Top 5 reasons why you need a financial adviser
What can a financial adviser do for you? Learn the reasons why seeking professional advice can be a good thing for your finances. ...Read more

Advice
Five questions you should ask your financial adviser in your first meeting
It’s a common misconception that the time to seek financial advice is when you are approaching retirement. It’s never too early. Financially savvy families are increasingly turning to financial a...Read more

Advice
Is traditional financial advice dead?
Australians are in need of affordable and accessible financial advice, with traditional expensive models likely to change, new research has revealed. ...Read more

Advice
Does it pay to seek advice?
Industry research has found that advisers generate an average 5.2 per cent more for their clients due to asset allocation and behavioural coaching. ...Read more

Advice
How to choose an accountant, according to an accountant
Choosing an accountant solely based on price may not always be the best decision, a member of the profession has warned. ...Read more

Advice
Beware poor management: How popular strategies could derail your portfolio
Investors are being warned that their financial advisers may be relying on outdated asset strategies and systems to manage their portfolios. ...Read more

Advice
How to make financial advice more affordable
Recognising that financial advice needs to be made more readily available to Australians through their super funds, one advocacy group is calling for the widespread uptake of a “record of advice” ...Read more

Advice
AMP Australia appoints new CEO
AMP Australia has a new man at its helm, with a former Sunsuper chief executive due to assume the reins this Friday and lead the strategic transformation of its advice and super business. ...Read more

Advice
Top 5 reasons why you need a financial adviser
What can a financial adviser do for you? Learn the reasons why seeking professional advice can be a good thing for your finances. ...Read more

Advice
Five questions you should ask your financial adviser in your first meeting
It’s a common misconception that the time to seek financial advice is when you are approaching retirement. It’s never too early. Financially savvy families are increasingly turning to financial a...Read more

Advice
Is traditional financial advice dead?
Australians are in need of affordable and accessible financial advice, with traditional expensive models likely to change, new research has revealed. ...Read more

Advice
Does it pay to seek advice?
Industry research has found that advisers generate an average 5.2 per cent more for their clients due to asset allocation and behavioural coaching. ...Read more

Advice
How to choose an accountant, according to an accountant
Choosing an accountant solely based on price may not always be the best decision, a member of the profession has warned. ...Read more

Advice
Beware poor management: How popular strategies could derail your portfolio
Investors are being warned that their financial advisers may be relying on outdated asset strategies and systems to manage their portfolios. ...Read more

Advice
How to make financial advice more affordable
Recognising that financial advice needs to be made more readily available to Australians through their super funds, one advocacy group is calling for the widespread uptake of a “record of advice” ...Read more