The Financial Conduct Authority (FCA) has launched an £11m campaign to help consumers make “better informed investment decisions”, as it warns that younger investors are increasingly putting money into high-risk products that are not appropriate for them.
The launch of the City regulator’s five-year InvestSmart campaign follows last month’s publication of its strategy to enhance consumer protections, particularly for what it views as high-risk investments including peer-to-peer lending.
The FCA has partnered with Olympic BMX gold champion Charlotte Worthington to promote the InvestSmart campaign, which urges inexperienced investors to ignore social media and online hype, and instead consider their appetite for risk.
It is encouraging consumers to ask themselves five questions before investing: Am I comfortable with the level of risk? Do I understand the investment being offered to me? Are my investments regulated? Am I protected if the investment provider or my adviser goes out of business? And should I get financial advice?
The FCA commissioned research to tie in with the campaign launch, which found that 76 per cent of those aged under 40 who have invested in high-risk products such as cryptocurrency and forex say they are driven by competition with friends, family and acquaintances and their own past investments.
Among the 1,000 people surveyed, 56 per cent said hype on social media and in the news had influenced their investment decisions.
68 per cent likened investing to gambling and just 21 per cent said they were considering holding their most recent investment for more than a year.
“We are seeing more people chasing high returns,” said Sarah Pritchard, executive director of markets at the FCA.
“But high returns can mean higher risks. We want to give consumers greater confidence to invest and help them to do so safely, understanding the level of risk involved.
“With our InvestSmart campaign we’re taking an innovative approach to reaching those tempted by high-risk products so that they can better understand the risks and where to get advice. We will be targeting people online and through social media, helping ensure inexperienced investors don’t get played. Together with a more assertive approach to finding and taking action against scammers, we hope InvestSmart will help people invest confidently.”
As part of its consumer investments strategy published last month, the FCA said it would “strengthen the financial promotions regime in three areas, our classification of high-risk investments, further segmenting the high-risk market and strengthening the requirements on firms when they approve financial promotions.”
The FCA lists P2P lending and Innovative Finance ISAs as high-risk investments alongside unregulated products such as mini-bonds and cryptocurrencies.
P2P lenders have previously hit back against the FCA’s proposals for tougher marketing restrictions and the UK Crowdfunding Association sent research to the FCA in response that showed investors understand the risks in the sector.