Consumers risk making inappropriate investments they do not understand as they search for a better return on their savings, the City regulator says.
Interest rates have been at record lows for some time, with a typical savings account now paying a paltry 0.33% in interest, official figures show.
In its annual business plan, the Financial Conduct Authority (FCA) said the search for returns left many investors exposed to higher losses.
It also raised fears over pensions.
A secondary market allowing people to sell their existing annuity, or retirement income, for a lump sum is scheduled to start in April 2017
"There are several risks we need to consider, for example, the risks of mis-selling and poor value for money for consumers, particularly those with small pension pots and the risk that our interventions undermine competition or stifle market development," the FCA said.
Risks v reward
The FCA's wide-ranging report, which outlines its priorities for the upcoming financial year, includes a string of warnings for individual savers, borrowers and investors.
All this comes with the backdrop of a record low Bank rate. One debt group - the Money Charity - said it feared the low-interest rate environment meant that people were becoming unaccustomed to saving and vulnerable to financial shocks as they had no savings buffer.
The FCA pointed out that financial innovation was offering new opportunities to personal investors, such as crowd-funding platforms, but that not all of these products were covered by the FCA's regulatory remit.
"While the proportion of the market accounted for by crowd funding platforms is relatively small, it may grow and become a more significant issue, highlighting the fact that innovation can drive competition and innovation, but may also come with new risks," the FCA said.
The regulator also highlighted the continuing risk to financial services of cyber attacks - claiming that these attacks, which at times have interrupted day-to-day banking, were "inevitable".
"These attacks are inevitable but firms need to ensure that they have defences and plans in place to deal with them. We will focus on identifying the impact of operational resilience risks in the firms likely to cause the most disruption to markets and consumers resulting from an incident, and how firms deal with such risks and impacts," the FCA said in the plan.