Investing and the risk you take concerns the FCA
There are lots of reasons why someone decides to invest their hard-earned money.
With easy access to the markets via online sites and mobile apps. Higher-risk investments and schemes are becoming more available, often to inexperienced and ill-prepared investors.
The FCA Findings
The Financial Conduct Authority (FCA) recently published research findings to better understand investors engaging in high-risk investments such as cryptocurrencies and foreign exchange.
They said, “Some of the most serious harms we see relate to investments outside our regulatory perimeter and online scams, many based overseas.
We are also seeing a concerted and conscious effort to promote higher risk investments that are inappropriate for the targeted people.
Most retail investors’ needs can and should be met by more straightforward, mass-market investments.”
Social media Influence
It is, of course, encouraging that younger people are getting interested in investing.
This is partly due to the access offered by new investment apps. It is not surprising that the majority of Instagram users are aged 13-34. If you search for #investing on Instagram, there are 25 million posts, and on TikTok, there are more than 2 billion!
The justified concern from the FCA is that research shows that consumers, particularly the more vulnerable, are less likely to understand the risks, read the small print and do not know what to do when things go wrong.
These consumers can also often neither afford the loss nor recover from it.
Read more research from the FCA
Read the top 8 investment mistakes to avoid
Advice needed.
Of course, sensible people would know not to take specific investment advice from someone posting on TikTok or a similar platform. For investing, they should only be used as a gateway to education and, of course, for a bit of fun.
It’s important to note that a regulated and authorised firm must adhere to strict regulations before providing advice or promotions.
The research found that many investors’ decisions were influenced by emotions, such as enjoying the thrill of investing.
This is particularly true for those investing in high-risk products for whom the challenge, competition and novelty are more important than conventional, more functional reasons.
38% of those surveyed did not list a single functional reason for investing in their top 3.
Sheldon Mills, Executive Director, Consumer and Competition at the FCA, said: ‘Much of the consumer investments market meets consumers’ needs. But we are worried that some investors are being tempted, often through online adverts or high-pressure sales tactics, into buying higher-risk products that are unlikely to suit them.
The FCA recommends.
- Am I comfortable with the level of risk?
- Do I fully understand the investment being offered to me?
- Am I protected if things go wrong?
- Are my investments regulated?
- Should I get financial advice?
Get in touch today if you want to discuss your attitude to risk towards your investments.
