Seamless customer journeys can make high-risk investments too easy to access
Most technology companies try to make the customer journeys as easy as possible. But an experiment conducted by the UK’s financial watchdog has found that when it comes to investments this may be making high-risks investments too easy to access.
The Financial Conduct Authority (FCA) said that it is concerned that some consumers are investing substantial amounts of money in high-risk investments – which includes any investment subject to marketing restrictions such as peer-to-peer agreements – without understanding the risks involved and by just “clicking through” mindlessly.
The results of the experiment examining the benefits of introducing decision points into consumer journeys were published alongside two others that aimed to investigate ways to reduce harm to consumers.
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The regulator also found that the standard risk warning for financial promotions, where consumers are told their capital is at risk, is often seen as white noise. It found that warnings that are more salient and that are simplified attract more attention from consumers.
The third experiment was conducted to find a way to improve the current self-certification process.
“Together, we expect information and positive frictions to serve as the decision points that encourage investors to reflect more on the risks associated with certifying as eligible for high-risk investments and change their behaviour accordingly,” the authors of the research paper noted.
The research notes were published at the same time as the FCA’s consultation paper on strengthening the financial promotion rules for high-risk investments.
The consultation, published on 19 January, includes proposals to ban the promotion of investor incentives and to improve risk warnings on ads. The FCA said that the experiments informed the range of measures it proposed.
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