banners 2

Risk warnings

1.    Purpose of risk warning

This notice provides a summary of the nature of risks that may arise in investing, but it may not disclose all the risks and other significant features of individual investment products and services. Please read the Key Features Document (KFD) and the terms & conditions of relevant service or product prior to investing. This notice describes the type of investments that may be purchased by you and summarises typical risks associated with those investments and services. The notice is designed to give you information about and a warning of the risks to enable you to understand them in order to take investment decisions on an informed basis.

You should be aware that with all of the investments available, there is a risk of losing your capital.  The amount of risk varies with each type of investment but in the very worst case scenario this can mean all of your capital is lost.  If your attitude to risk is that you are not prepared to take any risks with your capital you should instead consider investing in a deposit account or a guaranteed return investment.

You should not invest in or deal in any financial product unless you understand its nature and the extent of your exposure to risk. You should also be satisfied that it is suitable for you in light of your circumstances and financial position. Different investment products and investment areas have varying levels of exposure to risks and to different combinations of risk. If you have any doubts about the suitability of any of these investments you should contact us.

Past performance is no guarantee of future performance and unit / share prices and income can go down as well as up and you may not get back the amount you invested.

Withdrawing income from any investment may erode the capital and you may not get back the full amount invested. There are no guarantees that capital will not be eroded if you do not withdraw income.

Please note derivatives and preferred shares do not meet our ethical criteria and therefore will not be offered by us.

The stated risks apply to both execution only and advisory clients, unless stated otherwise.

Execution only risk warning: as an execution only client, any decisions on investments are purely your own choice and Simply Ethical will not provide any advice on these investments. We will execute the transactions for you only. You will therefore be responsible for loss with the investments chosen. Please ensure you fully read and understand the risks involved in any decision you make. If you have any doubt whether any investment is suitable for you, you should obtain expert advice. All transactions received will be conducted on an execution only basis unless otherwise stated. For execution only transactions you will not be afforded the protection of the Financial Services and Markets Act 2000 in relation to the suitability of the transaction.

If you have any questions regarding the types of investments or risks disclosed in this notice, please contact us.

2.    General risks

Market risk: 

The risk that the value of an individual investment or portfolio will fall as a result of a fall in markets. All investments can be affected by a variety of factors, including macroeconomic market conditions such as the interest rate or exchange rate environment, or other general political factors.

Liquidity risk: 

Liquidity describes the ability to buy and sell investments. If trading is relatively infrequent or only done in small amounts the investment is described as illiquid. Buying and selling illiquid investments can be difficult and prices can be volatile and can easily be affected by the size of the order. Moreover, most investments traded on markets have two prices, one for buying and one for selling.  Therefore buying and selling within a short time period can incur a loss purely due to this difference. For illiquid investments there is an increased risk of there being a larger gap between the buying and selling prices.

Inflation risk: 

The risk that the real value (the value adjusted to remove the effects of price changes over time) of an investment will fall as a result of the rate of inflation exceeding the rate of return on the investment.


The value of investments and the amount of income derived from them may go down as well as up. Volatility is statistical measure of the tendency of an individual investment to feature significant fluctuations in value. Commonly, the higher the volatility, the riskier the investment.

Equity risk: 

The risk that the value of equity becomes worthless as the company becomes bankrupt.

Credit risk: 

The risk of an issuer defaulting and being unable to repay the principal investment or financial gain.

Concentration risk: 

The risk that there is an insufficient level of diversification such that an investor is excessively exposed to one or a limited number of investments.

Counterparty risk: 

The risk that a party connected to an investment or transaction is unable to meet its commitment.

Exchange rate risk:

Where an investment is purchased in a currency other than the currency which is most relevant to the investor, there is an increased risk that the movement in exchange rates will affect the returns the investor receives from the investment. Typically this applies to shares and other investments traded on overseas markets whose price is quoted in a foreign currency.  But this can also apply to investing in a company whose main earning is generated in a foreign currency.

Early redemption risk:

Investing in certain products should be considered as a medium or long term exercise. If you need to use your capital in the short term, you should consider deposit accounts as you may suffer losses due to the short term market fluctuations and in some circumstances early redemption charges.

Withdrawal risk:

Withdrawals that you make from discretionary managed portfolio may adversely affect the overall performance of your portfolio. Where you instruct us to liquidate sizeable assets in a given portfolio with concentrations in a particular market, then this may affect the price: e.g. a significant withdrawal from a portfolio may compel us to sell positions at a price that we normally would not have sold at.

Operational risk:

Operational risk, such as a breakdown or malfunction of systems and controls, including IT systems, can impact on all financial products. Changes in leadership and organisational change can severely affect such risks and, in general, operational risk may not be apparent from outside the organisation. Business risks, e.g. poor management or leadership could also negatively impact on the value of investments.

Regulatory and legal risk:

All investments could be exposed to regulatory or legal risk. Returns on all, and particularly new, investments are at risk from regulatory or legal actions and changes which can, amongst other issues, alter the profit potential of an investment. Legal changes could even have the effect that a previously acceptable investment becomes illegal. For example, FCA’s ban on promotion of unregulated collective schemes (UCIS) to retail clients in 2013 had a negative impact on such investments. All such risks are unpredictable and can depend on numerous political, economic and other factors. For this reason, this risk is greater in emerging markets but does apply everywhere. In emerging markets, there is generally less government supervision and regulation of business and industry practices, stock exchanges and over the counter markets. There is no guarantee that an overseas investor would obtain a satisfactory remedy in local courts in case of a breach of local laws or regulations or a dispute over ownership of assets. Investors may also encounter difficulties in pursuing legal remedies or in obtaining and enforcing judgments in overseas courts.


Taxation reliefs, levels and bases can change in the future. There can be no guarantee that the nature, basis or incidence of taxation may not change during the lifetime of an investment. This may cause potential current or future tax liabilities, and you should be aware of the tax treatment of any investment product before you decide to invest. If your circumstances are changing, or if you are uncertain about any aspect of how an investment might relate to your own tax position, please seek professional tax advice.

 3.    Investment specific risk

All investments involve a degree of risk of some kind. This section describes some of the risks which could be relevant to the services we provide to you. We may provide further risk information during the course of our services to you, as appropriate.


Also known as equities, a share represents a share of ownership in a company, and these shares are listed on a stock exchange. The risk associated with equity investments (shares in individual companies) is generally accepted to be higher than fixed interest and deposit investments. Equity investments cover a wide range of risk, which can vary depending on the size of the company, its business and products and the market on which the shares are listed or quoted. Share prices can fluctuate suddenly, and sometimes very sharply as experienced during 2008/09 financial crises and this is why shares are considered a higher risk investment than cash, bonds and property. It is also the reason why they are more suitable as a longer term investment. In general, the longer you stay invested in the stock market the better you tend to do, as you are better positioned to ride out any fluctuations in the market.

Not all share investments carry an equal risk; the level of risk depends on the company you are looking to buy shares in. A small start up with an innovative product or those listed LSE Alternative Investment Market (AIM) will have a higher risk profile than a blue chip company, for instance, but the attraction of relatively small companies is that it may offer the potential for higher returns. Moreover, a small company may not pay out dividends, as it needs to reinvest any profits back in the company, whereas the larger, more established company may offer attractive dividend payouts. It is essential to understand your investment goals and risk profile before investing in shares. It is important to research any companies you intend to buy shares in to ensure they offer a suitable investment opportunity for you.

Smaller companies: 

Investment in the securities of smaller companies can involve greater risk than is generally associated with investment in larger, more established companies which can result in significant capital losses which may have a detrimental effect on the value of the investment. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for securities in smaller companies is often less liquid than that for securities in larger companies and therefore, the fund manager or the investor (if buying directly) may experience difficulty, from time to time, in purchasing or selling holdings of such securities. Also smaller companies may not do as well in periods of adverse economic conditions.


The AIM market is a market designed primarily for emerging or smaller companies. The rules of this market are less demanding than those of the Official List of the London Stock Exchange and therefore the companies quoted on AIM carry a greater risk than a company with a full listing.

Money market instruments:

A money market instrument is a borrowing of cash for a certain period, usually no longer than six months, but can be up to one year. The lender takes a deposit from the money markets in order to lend (or advance) it to the borrower. The borrower must specify the exact amount and the time period for which he wishes to borrow. Money market instruments may be exposed to the major risks outlined in this notice, in particular credit and interest rate risk.


Bonds are loans to a government or company.The value of bonds (debt investments) is usually more stable than equity investments. However in some circumstances, particularly when interest rates are changing, the value of bonds can be uncertain. The most common use of a bond is to provide a reliable yield, or source of income until maturity. For example the value of a bond can be adversely affected by a number of factors such as:

  • Credit rating of the issuer, which reflects their ability to repay the amounts payable when they fall due;
  • Amount of interest payable (the coupon);
  • Market expectations on interest and inflation rates;
  • The length of time until the debt falls due for repayment; or
  • The seniority of a bond within the capital structure of a company, and the quality of any security available.


We may deal for you in investments that may have been the subject of stabilisation. This is a price supporting process that often takes place in the context of new issues and similar offerings, including rights issues. The effect of stabilisation can be to make the market price of the investment, which is the subject of the issue or offering, higher than it would otherwise be. Stabilisation may also affect the price of investments of the same class, which are already in issue, and of other investments whose price affects the price of the new issue. Stabilisation is undertaken in order to ensure that the issue of investments is introduced to the market in an orderly fashion, and that the issue price and/or the price of associated investments is not artificially depressed because of the increase in supply cause by the new issue. The fact that there have been dealings in an investment in which stabilisation may be taking place does not necessarily mean that investors are interested in buying that investment or in buying it at the level at which the dealings have taken place. Stabilisation takes place for a limited period. There are limits on the price at which shares, warrants and depository receipts may be stabilised but the limits do not apply where loan stock or bonds are being stabilised. At the time of dealing, reasonable steps will be taken to enable you to understand the nature of the risks involved.

Collective Investment Schemes (commonly known as funds):

A fund is a term that covers different types of structure, normally Open Ended Investment Companies (OEICs) or Unit Trusts. Investment funds pool money from a collection of investors and then invests that sum in financial instruments. This is handled by a professional fund manager Investments held by these funds may include gilts, bonds and quoted equities, but depending on the type of scheme, may hold higher risk instruments such as property, derivatives, unquoted securities and other complex products. The value of a fund, and the income derived from it, can decrease as well as increase and you may not necessarily get back the amount you originally invested. In addition, funds bear investment management risks, insolvency risks and possibly liquidity risks. You should ensure that you understand the nature of any fund before you invest in it.

Exchange Traded Funds: 

ETFs is a pooled investment that's like an investment fund, investing in potentially hundreds, sometimes thousands, of individual securities, but trades on an exchange throughout the day like a stock. When an investor buys an ETF share, he or she is buying a small percentage ownership of a large portfolio of stocks, bonds or other assets. It is basically an ownership stake in a pool of assets. ETFs normally closely track the performance of a financial index, and as such, their value can go down as well as up and you may get back less than you invested. Some ETFs rely on complex techniques, or hold riskier underlying assets, to achieve their objectives and therefore you should always ensure you read the documentation provided to ensure you fully understand the risks you are taking on before you invest.

Investment Trusts:

Investment trusts are similar to funds in that they provide a means of pooling your money but they are publicly listed companies whose shares are traded on the London Stock Exchange. The price of their shares will fluctuate according to investor demand and changes in the value of their underlying assets. They will be subject to a combination of the risks associated with shares, bonds and funds in which they are invested. The value of investment trusts, or the income derived from them, can decrease as well as increase and you may not necessarily get back the amount you invested.

Property funds:

Investments in property funds involve a number of risks particular to this class of asset. Notably fixed property is immovable and might not be easy to sell or to value independently. As a result of the illiquid nature of property, realisation may take some time. There is no guarantee that the underlying properties will remain occupied, or that they might not incur significant maintenance or restoration costs which may impact on the returns available. All property is subject to local risks which may be unique in nature, which may be caused by factors such as the prevailing legal, economic, environmental or political circumstances. Returns available from property funds may also be affected by leverage where borrowing is used to finance either construction or purchase.

Non Mainstream investments:

Certain investments are deemed to be non mainstream collective investments (these include unregulated collective investment schemes, some special purpose vehicles and other complex investments) and are not subject to the same regulatory protections as other investments. Such investment may be included in some discretionary portfolios offered to advisory clients, although relevant due diligence including suitability and appropriateness test will be conducted prior to recommendation. 

Investment manager risk:

This is the risk of loss from the poor performance of the fund managers in your portfolio as well as by us in the management of your discretionary or advised portfolio.

This list is not intended to be fully inclusive of all relevant risks; we would strongly encourage you to read all relevant literature, and that you are comfortable that you understand all of the associated risks relating to an investment, before you decide whether or not to purchase it. Should you be in any doubt as to the risks involved, or to the suitability of a particular investment, you should seek professional financial advice.

...Stay connected