by Paul Lewis
BBC Radio 4's Money Box
A director of the Financial Services Authority (FSA) has warned savers that putting all their money in cash may be a mistake.
The FSA publishes its Risk Outlook annually
After three years of stock market falls, many investors are still very cautious about risking their money in shares, despite the 14% growth in share prices in 2003.
But Dan Waters, FSA Director of Regulatory Strategy and Risk, told BBC Radio 4's Money Box:
"Consumers seem to be retrenching and moving away from investments into savings.
"We think that over the long term that is likely to be an unsuccessful strategy for many people."
He stressed that cash savings are an important part of a portfolio but should not be the whole thing.
Ideally, he said some of savings should be in cash, some perhaps in property, and some in investments.
Asked if he was concerned by investors' caution leading them to keep a lot of their savings in cash he said: "We do see evidence of retrenchment and that is a worry to us, yes."
Mr Waters was speaking in the week the FSA published its Financial Risk Outlook 2004, in which it warned that consumers had to take more responsibility for understanding their own financial affairs.
Mr Waters went on to warn financial advisers that if clients with debts came to them for advice on investments, then the advisor should not just sell an investment product and ignore the debt. It was always a question of giving suitable advice.
He told the programme: "Looking at questions of suitability is important.
"If a consumer comes in and has a very clear idea of a particular thing they want to buy that is one situation.
"But it is important when a consumer is seeking advice about the sorts of investments they ought to make, then debt is certainly on the agenda, is something that ought to be considered by the advisor."
Consumers were also warned about borrowing too much using booming house prices as security. Mr Waters said that significant levels of household debt could turn into real problems if interest rates rose more than expected:
"People have been taking on a debt at quite a dramatic clip actually.
"We now have something like 50% of families in this country having unsecured debt on average of £6,500.
"We worry that people do not understand the long-term implications of having a substantial amount of debt, and the risks associated with, for example, interest rates over time increasing.
"That will make their debt portfolio look quite different."
BBC Radio 4's Money Box was broadcast on Saturday, 24 January, 2004 at 1204 GMT.
The programme was repeated on Sunday, 25 January, 2004 at 2102 GMT.