Savings and Investments: Conduct, Risk and Protection
What to master
Savings and investment regulation is mainly conduct-focused: know your client, risk profiling, suitability and appropriateness, product governance, cost disclosure and fair treatment. MiFID II rules apply to investment firms; PRIIPs requires a key information document for packaged products. Deposits are protected by the deposit guarantee scheme up to €100,000 per depositor per institution; investments have investor compensation cover with lower limits and only for specified failures such as misappropriation. Learn the risk–return relationship, liquidity, time horizon, diversification and the distinction between advice and execution-only. Tax treatment differs: DIRT on deposits, exit tax on funds, and CGT or dividend tax on shares. Charges compound against the client, so compare gross return with net return.
Traps
Confusing appropriateness with suitability. Assuming a “guaranteed” product has no credit risk. Treating past performance as predictive. Ignoring charges, exit penalties and lock-in periods. Believing deposit protection is unlimited or per account. Selling a long-term product for a short-term need. Missing that execution-only means no suitability assessment.
Worked example
€10,000 grows at 3% compound for 10 years: 10,000 × 1.03^10 = €13,439. Rule of thumb: match the product’s risk and lock-in to the client’s horizon; money needed within two years should not be placed in an equity fund, regardless of expected return.