There has been so much in the press and media over the last 12 months about what can happen to your money when an institution fails, that it can be easy to misunderstand how safe your money and your investments are. The failure of Keydata last month has made this even more apparent.

We have concerns about the number of companies marketing "structured" or "guaranteed" products at the moment, because we feel that people are in danger of buying investments that they really don't understand.

If your money is with a UK deposit taker that is registered with the FSA, cash deposits of up to £50,000 or £100,000 are protected and guaranteed by the government. If the bank goes bust the government will make sure you get your money back up to these limits, although the claim process can take up to six months. Until the Icelandic bank went bust, there was not even a process in place for making claims, simply because no one thought it would ever happen.

The situation will differ with foreign banks such as ING, Anglo Irish and Dutch Bank. These banks have no UK government protection. The protection that you receive is via the government of the provider's country of registration.

Money in unit trusts and QEICs is fully ring-fenced. This means that as the money invested does not become the company's, and by legal title remains yours, then your funds are 100% protected from the provider going bust.

So what about structured or guaranteed products?

To understand what protection there is, you must understand the product.

With these products you invest for a fixed period of time; one year, two years, five years for example, and the fund guarantees a specific return. Very often this is linked to the movement of an index such as the FTSE100. When you place, say £10,000, in the fund, a percentage, say 90%, is placed in an investment, with the remaining amount, in this case 10%, being used to buy an "option" or a "future". These effectively are bets on the market. For example, the "option" may give the provider the right to buy stock in the FTSE100 at a rate of 4800 at maturity, even though the market might be at 4500. Thus, there would be a gain of 300. By carefully structuring these "options" the provider constructs "guarantees" of return.

This technique carries two risks. The first is that the person calculating the right options to buy must really get their maths correct. What you must remember is that when someone wins in the market, someone else usually loses. So for every correct calculation, there is probably someone else making a wrong calculation. The second risk is that the company providing the "option" must stay in business. If they don't, then you lose your guarantee! This is what happened with Lehman Brothers. Any investor with a structured product that had a Lehman Brothers' guarantee lost their money.

These are two very real risks, and with the mess that many banks have made of their balance sheets, we have little confidence in them getting these things right.

Remember, as a general rule, if it looks too good to be true then it probably is. Many banks are looking to sell these packaged products, as they usually receive large commissions on the sale of the product internally, many of which do not need to be advised to the client as they are not FSA registered or protected. It is a very easy way for them to make a profit and grow their income.

We recommend only to buy a product if you understand it, and if you really are certain that you understand the risk involved in it.