What does the term "mis-selling" refer to in financial services?

The term "mis-selling" in financial services primarily refers to the act of selling products that are unsuitable for the consumer's needs. This situation typically arises when a financial service provider does not adequately assess the customer's requirements, circumstances, or financial situation before recommending or selling a product. The essence of mis-selling lies in the lack of alignment between the product being sold and the actual needs of the consumer, which can lead to financial harm or disadvantage for the client.

Mis-selling can occur in various forms, including but not limited to, offering high-risk investment products to risk-averse clients or selling life insurance to individuals who do not need it. Regulatory bodies in the UK, such as the Financial Conduct Authority (FCA), monitor these practices to ensure that consumers are treated fairly and that firms are held accountable for their sales practices. The focus on suitability is designed to protect consumers from being sold products that do not fit their personal financial goals or risk tolerance.