The Financial Services Authority has announced the creation of a task force to examine to use of ‘past performance’ data in advertising for financial products.

The move follows growing concern that the public is being confused – misled even – by some of the conflicting performance claims made by advertisers. The investigation is also triggered by the FSA’s publicly expressed concern that past performance is no guide to future achievement in the case of investment products.

The task force will be chaired by Christine Farnish, FSA director of consumer relations and include a representative cross-section of experts and lay people including academics, consumer representatives and members of major financial groups. Says Farnish: “There is a wide body of evidence to show that past performance is not, in itself, a useful guide to the future performance of investment funds.”

But although financial advisor Best Investment agrees that “there is a need to tighten up on the use of past performance data in marketing literature”, it disputes “that past performance can never have any value at all”. Argues BI spoke Jason Hollands: “Where a company has a strong track record, with the team responsible for that record still in place, we think they should be able to refer to that fact.”

News source: The Times (London)