Investment - Articles - FCA research helps avoid high risk investments like crypto


Over 1 million UK adults increased their holdings in high-risk products like crypto or crowd funding investments in the first 7 months of the pandemic. FCA research used behavioural insights to show how red alerts on a promotional page can sharply increase knowledge of risk. Simple check point criteria to self-certify resilience, time delays and evidence requests can nudge vulnerable consumers away from hasty high risk decisions.

 The FCA has published research into how consumers can be made more aware of pitfalls of high risk investments: Beyond disclosure for high-risk investments: slow down and think | FCA

 Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown: ‘’The boom of high risk investing is causing huge nervousness among regulators, with the Financial Conduct Authority increasingly concerned that vulnerable consumers are being swept up in a frenzy of speculation. The FOMO effect which took hold during the pandemic, has been drawing more people into the murky world of crypto investments and almost half still don’t understand the risks involved.

 The FCA has estimated that a million UK adults, 6% of all UK investors, increased their holdings in high-risk products or bought new high risk assets during just the first 7 months of the pandemic. This is particularly worrying as it came at a time of increased consumer vulnerability and if they had invested in crypto, they would have seen the value of their holdings plunge dramatically in the last few months. Now, with the cost of living squeeze intensifying, the focus should instead be on ensuring consumers have a resilient pile of savings and lower risk investments to fall back on. There is woeful knowledge about the financial dangers of investing in high-risk products, which include investment based crowdfunding, with 45% of investors not aware that losing some money was potentially a hazard.

 It’s clear that education needs to be sharpened up pretty pronto - with so many vulnerable consumers being lured in, and it’s very welcome that crypto assets will soon fall under the FCA’s watch as part of new legislation. There are big pointers in this latest research indicating the depth of warnings which may become a legal requirement under the new regime, as part of the FCA’s aim to persuade consumers to slow down and think before handing over hard earned cash. Researchers used behavioural insights to show how red alerts on a page can sharply increase knowledge of risk. They also highlight how simple check-point criteria to self-certify resilience, time delays and evidence requests can help reality to dawn and nudge vulnerable consumers away from hasty ill thought through decisions.

 Assuming these proposals come are brought it, they will significantly sharpen decision making and shift investing behaviour so that many more consumers take a deep breath before jumping into high risk deep waters, and only paddle in at the edge of their portfolios.’’
   

Back to Index


Similar News to this Story

Inheritance Tax raises almost GBP6 billion in 8 months
December’s update from HMRC shows that Inheritance Tax (IHT) receipts reached £5.7 billion through the first two-thirds of this financial year (April
PIC completes first Mosaic buyin with GCB Pension Fund
Pension Insurance Corporation plc (“PIC”) has concluded its first full scheme buy-in within Mosaic, PIC’s streamlined service for pension schemes with
Airways Pension Scheme complete longevity hedge with MetLife
The Trustees of the Airways Pension Scheme (“the Scheme”), Metropolitan Tower Life Insurance Company, a subsidiary of MetLife, Inc., (“MetLife”) and Z

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.