Investment managers too often sell whatever funds are in fashion even if those markets are about to nosedive, the Financial Services Authority today claimed.

This ‘bandwagon’ culture repeatedly leads to consumers buying completely inappropriate products, according to Clive Briault, managing director of retail markets at the FSA.

Fund management houses need to get closer to the end client and focus on providing the products and services they really need, he warned.

Speaking at an FSA asset management conference, Briault said such concerns were part of the ongoing Retail Distribution Review (RDR). He said: ‘Our perception is that investment products and services seem too often fashioned to meet the needs of providers and distributors, with consumer needs taking a back seat.

'You may say that the role of the product provider is simply to provide products that satisfy appetites at the time they are sold. It seems to me, however, that the traditional method of product creation in the fund management industry – designing products for which there is a perceived appetite, perhaps because the sector or theme has already attracted a significant amount of interest from other investors – is not one that always results in products that are geared to consumer needs. Indeed it can amount to jumping on the bandwagon, often as it is about to take a rather exciting plunge.’

Fund providers need to get closer to the end client rather simply rely on intermediaries, Briault said.

‘Providers and manufacturers of financial products, including the fund management industry, have in some respects become divorced from direct relationships with end consumers, placing great reliance on a large population of financial advisers and other types of third party sales to achieve product distribution.

'This separation of the product creator from the end user presents a significant set of risks. It seems to me that we must improve the delivery of appropriate products to end consumers.'