Share page with AddThis


FCA issues warning to young investors taking high risks

Caution tapeThe UK’s regulator, the Financial Conduct Authority (FCA), has issued a warning to young investors on the danger of buying into high risk investment products amid fears that the use of new investment apps and social media is fuelling a move into high risk products.

The warning comes on the back of research conducted by the FCA that found four out of ten consumers do not view “losing some money”  as one of the risks of investing.

The FCA also suggested that the accessibility offered by new investment apps has attracted a more diverse audience – younger, more female and more BAME – who are said to be more reliant on contemporary and social media for tips and news.

“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 very unlikely to be suitable for them,” said Sheldon Mills, executive director, consumer and competition at the FCA.

The research also found that many investors cited emotional and social factors such as “the thrill of investing” as key reasons for their investment decisions.

This was particularly true for those investing in high risk products who ranked the challenge, competition and novelty as more important than functional reasons such as saving for retirement.

The FCA has also launched a “digital disruption” campaign alongside the research which will aim to use online advertising to appeal to younger investors relying on social media and direct them to the regulator’s own webpages.

Concern around investment apps and social media has risen following the GameStop phenomenon where the users of trading apps such as Robinhood fuelled an unlikely rise in the stock of the gaming company.

“In many ways trading apps have democratised the whole investment process but they need to be used thoughtfully,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown. She highlighted the use of chat communities on some investment platforms “which can fuel short-term trading behaviour”.

© 2021 funds europe

Most read features

Cryptocurrencies: Solving crypto’s sustainability problem

Cryptocurrencies like bitcoin have a huge carbon footprint but, as Nicholas Pratt discovers, environmentally friendly alternatives exist.

Roundtable: The digital transformation opportunity

The funds industry is looking at adopting new types of technology, from automation to ESG reporting, blockchain and tokenisation. A FundsTech roundtable in March explored how these will revolutionise the sector.

Proxy voting: Making every vote count

With stewardship more important than ever and digital technology to the fore, surely it is time to solve the problem of proxy voting? Nicholas Pratt investigates.

Interview: Rise of the robo-adviser

FundsTech talks to Nutmeg’s CTO, Matt Gatrell, about the role of technology in its online offering.

Regulation: Panel calls for simplicity in ESG reporting

The industry accepts the need for more rigour in ESG fund reporting, but the work will be pointless if investors don’t understand the end result. Nicholas Pratt reports.

Sponsored Profiles

Data consolidation takes centre stage in asset management M&A

MergersConsolidation between asset management firms is overwhelmingly expected to increase. Operational challenges remain thanks to legacy systems. But in a recent...

Are you being microserved?

As asset managers grapple with new digital technology, FundsTech talks to Calastone’s Adam Belding about the importance of software architecture and the benefits...

Sponsored profile: A question of trust

AcrobatsAs more firms adopt agile software development practices, Petra Roche of Metrosoft explains why trust is so important in making agility work.

Sponsored feature: Compliance and the case for agility

CheetahFundsTech talks to Janusz Lorenc, CEO of Metrosoft, about asset managers’ approach to compliance risk and the case for agile software development.