Younger investors warned about rash choices in new FCA campaign

Younger investors are being warned about making rash financial decisions from sources such as social media and ‘finfluencers,’ in a new multi-million pound campaign from the Financial Conduct Authority.

The City watchdog has long warned people of the dangers of speculative and illiquid assets but is looking to further educate newer investors amid concerns they view it as gambling.

Earlier this year it sounded the alarm after it found younger investors were taking on too much risk when investing.

A wave of younger investors took to investing after building cash savings during lockdown, while some were inspired by the Gamestop saga in January. 

Calculated risks: BMX Gold medallist Charlotte Worthington has partnered with the FCA to warn investors of the dangers of high-risk investments

Amateur investors inflated the unloved stock’s share price, but those who bought at the peak are still nursing losses.

While the FCA has identified the rise of DIY investment apps as one of the reasons behind this risky investing, it has also said newer investors are increasingly likely to be reliant on social media and ‘finfluencers’ for tips and news.

Now with the launch of its InvestSmart campaign, the FCA has hired its own celebrity influencer, Olympic BMX gold champion Charlotte Worthington.  

‘My first run at the Tokyo Olympic Games didn’t quite go to plan, but because I had prepared properly I was able to get it right in the next run. 

‘It’s all about the smaller calculated risks in practice that don’t always go to plan, to gain the right experience to pull off something bigger at the right time,’ she said.

‘When it comes to investments, I would only take on high risks if I felt like I’d done enough research and I was properly prepared.’

The five-year campaign will look to target those who are considering making their first investment online and through social media.

The FCA is concerned new investors are putting money into high risk investments like Bitcoin and other cryptocurrencies without understanding the risk

It comes after new research found this new generation of investors had been ‘driven by competition and influenced by hype.’

An FCA survey of 1,000 people aged 18-40 who invest in high risk investment products, such as cryptocurrency or forex, found three in five agreed they had been encouraged to invest after hearing about a product on the news or social media.

Social media hype has also led to more than three quarters of high risk investors feeling a sense of competitiveness when investing, with 68 per cent likening it to gambling.

Sarah Pritchard, executive director of markets at the FCA, said: ‘We are seeing more people chasing high returns. 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 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.’ 

The campaign will ask investors to consider their appetite for risk and direct them to its website. It recommends ‘five important questions to ask yourself before you invest’:

• 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?

• Should I get financial advice?

Moira O’Neill, head of personal finance at investment Interactive Investor, welcomes the FCA’s intervention and says while more needs to be done on education, the young investors on its platform have broadly balanced portfolios. 

She adds: ‘We have a lot of time for the FCA’s InvestSmart campaign, but we think young people would get off to an even better financial start with more financial education in the classroom. 

‘This has not been joined up or given the time on the national curriculum that it deserves. 

‘We also need to have more balanced conversations about risk and reward, and need to be careful not to fall into avocado-style shaming of young people and their investment risk.’ 

To find out more, visit the InvestSmart website. 

This post first appeared on Dailymail.co.uk