The Financial Conduct Authority (FCA) is looking to help Brits invest “safely” as part of its newly created campaign aimed at inexperienced savers.
The UK watchdog has launched an £11m ($15.2m, €13m) five-year campaign called InvestSmart to target investors who are possibly dipping their toe in the market for the first time and need help navigating their way through the sector.
The campaign aims to reach those investors through social media and online, where much of the hype around investments happens. The campaign asks investors to consider their appetite for risk and to ignore the trends, directing them instead to advice available on the FCA’s website.
This is part of the FCA’s consumer investments’ strategy, which was unveiled in September. It aims to give consumers the confidence to invest, supported by a high-quality, affordable advice market, leading to fewer people being scammed or persuaded to invest in products too risky for their needs.
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 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.”
Moira O’Neill, head of personal finance at Interactive Investor, added: “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.
“Whether amongst the younger or the older generations, we are in an age of extremes when it comes to investment risk, and while the FCA’s InvestSmart intentions are spot on, they need support from government in the form of more financial education in schools.”
To coincide with the launch of its InvestSmart campaign, the FCA surveyed 1,000 people aged 18-40 who invest in high-risk products.
More than three-quarters (76%) of those that invested in high-risk vehicles such as cryptocurrency and forex said they are driven by competition with friends, family and acquaintances and their own past investments. Some 68% likening it to gambling.
A small number said they were investing for the long haul. Just 21% said they were considering holding their most recent investment for more than a year, and 8% for more than five years.
This is despite 60% saying that they prefer more stable returns than investments that rise and fall dramatically.
The survey also found that hype on social media and in the news is driving new investors to take-up high-risk investments. Almost six-in-10 (58%) of respondents agreed that constantly hearing about a certain investment on the news, on social media, and from other people encouraged them to purchase specific products.
The majority of those who used services like fx trading online to purchase forex or crypto (57% and 69% respectively) incorrectly believed these to be regulated by the FCA. As a result, they were unlikely to understand the lack of investor protection and the risk to their money.
As part of the campaign, The FCA has joined forces with Olympic BMX gold medallist Charlotte Worthington to highlight the pitfalls of high-risk activities, and the need for proper preparation before attempting them.
Worthington said: “BMX is about big risk, and big reward – but it has taken a lot of preparation to get to this point, with highs and lows and hours of training to get the basics right one trick at a time. Anything high risk might not always go to plan, it’s about being prepared and minimising your risks through research and information.
“For example, 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.
“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.”