There’s been a lot of noise lately in the savings and investment space, crypto this, forex that, golden returns in real estate and whispers of passive income around every corner.
And while much of it sounds promising (even exciting), the real question every investor should be asking is: Is this product suitable for me? As compliance professionals, we’re trained to ask exactly that.
Suitability and
appropriateness are more than checkboxes on a client form, they are pillars of
financial responsibility. Let’s break it down the way your auntie would understand
it (and hopefully your relationship manager too).
Suitability asks: “Is this
product right for the client’s needs, goals and risk appetite?”
Appropriateness asks: “Does
this client understand what they’re getting into?”
Imagine walking
into a shoe store and being sold stilettos for a hike up Mt Kenya.
They’re stylish. They’re on sale. They fit, and make you look leaner. But
will they get you to the summit with your ankles intact? No prizes for guessing.
That’s a suitability fail.
Now imagine you're sold a complicated leveraged derivative product (yes, you … who just wanted to save for your kid’s school fees). It’s high risk, full of technical terms, but your banker says, “Trust me, it’s hot right now.”
That’s an appropriateness fail
because no one checked if you even understand the risks, let alone signed up
for the ride.
- Suitability protects you from being sold nonsense you shouldn’t have.
- Appropriateness protects you from being sold what you don’t understand or have no experience in.
Why “Why” Still Matters
Determine your why, make deliberate actions and then make your money silently and slowly. Here’s a practical lens on commonly offered financial products and who they might actually be right for:
Money market funds
What they are: The humble, dependable cousin in your portfolio. These funds
invest in low-risk, short-term debt instruments and offer modest returns, often
compounded monthly.
Suitable for: Conservative investors saving for a short- to
mid-term goal, school fees in a few months, an emergency fund, or that chama
you chair.
Appropriateness check: Easy to explain, easy to understand. But if
someone’s chasing retirement-level returns or quoting Warren Buffett, redirect
politely. MMFs won’t make them rich, but they’ll help them sleep at night.
Sacco savings
Not suitable for: Those expecting double-digit returns or looking
to diversify their portfolio.
Appropriateness check: Clients should understand how Sacco
governance works, how long their money is locked in, and that it's not an
instant ATM.
What they are: Professionally managed investment pools that spread your money across a variety of assets: bonds, equities and more. You can choose growth funds (for long-term) or income funds (for regular payouts).
Suitable for: Clients who want to invest but don’t have time to
stalk the stock market. Great for diversification.
Appropriateness check: Explain the risks clearly, returns are not
guaranteed and markets can (and will) dip. If you are the type who panics
every time there’s a red arrow on the dashboard, this may need extra handholding.
Suitable for: Long-term, conservative investors. Perfect for that
pension plan or your parents’ “do-not-touch” account.
Not suitable for: Anyone who might need that money in a month’s notice.
Appropriateness check: Be honest about the lock-in period and how
illiquid these investments are.
Shares/Equities
What they are: Ownership in a company. With that comes risk, volatility and if
you play the long game there’s a potential reward.
Suitable for: Investors with a high-risk appetite, a long-term
outlook and nerves of steel.
Not suitable for: Anyone who checks his or her investment balance
more than his or her blood pressure.
Appropriateness check: Ensure you understand that the market doesn’t care about feelings. You could lose money temporarily or permanently and should only invest what you can afford to part with. And for God’s sake use a reputable stockbroker (damn you discount securities).
Unsuitable recommendations: Where institutions get it wrong
Far too often, financial institutions push products to meet sales targets not client needs. A client saving for next year’s school fees ends up locked into a five-year investment. A risk-averse retiree is handed an aggressive equity-linked product they barely understand. The root issue?
Poor needs analysis and, let’s be honest, weak compliance oversight. I’ve seen it first-hand: clients losing their life savings because a relationship manager was chasing commission and figured they’d worry about the client later. In institutions without proper controls, these sales-driven behaviours wreak havoc on people just trying to grow their savings responsibly.
Today’s glitzy fintech apps, instant leverage tools and margin lending options make it easier than ever to enter high-risk positions—without fully understanding the consequences.
Margin calls forced sell-offs, and rapid losses aren’t abstract risks—they’ve pushed some clients, especially retirees or inexperienced investors, into real distress. In some tragic cases, it’s ended in suicide.
This is where
compliance must step in—not just as a function, but also as a safeguard
A true compliance function doesn’t just react; it sets the tone upfront. Our job is to ensure that clients aren’t just sold products; they’re matched to them.
That marketing is balanced, disclosures are clear and that clients can make informed decisions. Let’s not forget—our internal policies can’t be stuck in 2012 while the regulator is living in 2024. They’ve made it clear: Treat Customers Fairly isn’t a slogan, it’s a standard.
Product suitability isn’t optional; it’s the bare minimum. And conduct risk? That’s not just about avoiding fraud; it’s about making sure your frontline staff aren’t turning into commission-chasing cowboys.
Saving and
investing isn’t just a personal journey, it’s a regulated interaction. One that
comes with duties and obligations, especially for institutions. The industry
must move away from product pushing and return to client-centred advice.
As compliance professionals, we hold the line, because financial inclusion without protection is just exploitation in disguise.
Compliance, risk and Fintech
executive
