The protection of financial services users: The case of insurance companies and investment funds

Abstract

The users of financial services generally do not have the required expertise that they need to process the available financial information when they make financial and investment decisions, and as such they represent a sensitive category of financial market participants, which may intentionally or unintentionally be exposed to manipulation. If the beneficiaries do not have relevant and accurate information, the relationship between the provider and the service user is characterized with information asymmetry, and because of these reasons adequate regulatory instruments are necessary in order to protect the interests of financial services users. In the financial services sector, the development of a long-term successful relationship between providers and users of services should be based on mutual trust and users' feel that they have received a value for the price paid. The aim of the paper is to highlight the modern ways of improving the protection of the interests of consumers of financial services provided by insurance companies and investment funds. The paper analyses the reasons for protection of consumers of financial services, specifics of insurance as financial service, the importance of trust as a key factor for the attraction of service users and the basic principles of operation of investment funds in the developed and the domestic financial market are compared. The particular attention is given to insurance companies and investment funds in terms of regulatory and other mechanisms of governments that are related to the protection of insureds and investment funds investors.