The Financial Conduct Authority (FCA) has set in motion an £11 million campaign that aims to help investors make better decisions. The campaign is called InvestSmart, and it is meant to last at least five years while the agency works to establish further and enhance consumer protections. This initiative by the financial regulatory body was prompted by the high trade volumes that have recently been seen in risky investment categories such as cryptocurrencies, meme stocks, and peer-to-peer lending.
2020 saw a spike in new investors due to the market sell-off provoked by COVID-19. Despite the worsening of the global economic market and the high inflation rates in the United Kingdom, many still chose to place their money in uncertain investments. In fact, retail stockbroker The Share Centre notes that there was a 269% increase in new account openings during the period from March 9th to 30th in 2020, as compared to the same period in 2019. This is indicative of the fact that a lot of beginning investors actually sought to take advantage of the collapsing global market by finding refuges for their cash and opportunities for gain.
The spike in neophyte investors was further propelled by the accessibility and convenience of today’s trading platforms and online brokerages. Once upon a time, entering investment markets on a whim was a difficult prospect; now, it is anything but. Famously, a slew of new investment apps has made it simple for market newcomers to begin making financial trades with minimal amounts. But it isn’t only the trendy, headline-grabbing apps (think Robinhood and Acorns) that have become easier to use. In The UK specifically, Hargreaves Lansdown has gained significant market share by offering professional fund- and share-purchasing services at a reasonable cost. And an overview of FXCM shows that the tried-and-tested MetaTrader 4 investment platform is now readily available to be downloaded as a mobile app or computer application as needed. Tools like these have collectively welcomed countless new investors to the market who may have balked at more complex or less accessible platforms in the past.
While these platforms are reputable and appealing, however, they don’t change the fact that a lot of new investors are unprepared. Furthermore, there are also less reliable trading platforms that attract beginners in similar ways –– as well as highly volatile markets that are particularly effective at attracting novice traders for a variety of reasons. This is evident in the continual upward trend in crypto investment, and has also manifested in various trading crazes, such as the GameStop frenzy that occurred early in 2021.
In accordance with all of this, an FCA survey earlier this year determined that there were a lot of investors who ran the risk of severely compromising their finances. Executive Director Sheldon Mills noted with regard to said survey that many of today’s investors are being pressured by sales tactics and online adverts to buy high-risk products that are not “suitable” to the investors’ circumstances or needs. The FCA’s research also revealed that many investors were driven by emotions, hype on social media, and competitiveness when choosing what companies and investment products to put their money behind. This is particularly worrying given that 59% of investors surveyed by the FCA stated that a significant investment loss could jeopardise their current and future lifestyles.
Through its InvestSmart campaign, the FCA hopes to reach investors who are tempted by high-risk products. Some of the main goals of the initiative are to help investors find trusted resources to get investment guidance from and help them better understand the potential pitfalls of various high-risk investment vehicles. The FCA is planning to do all of this through an assertive campaign and by connecting with investors through social media. The regulatory body has already enlisted the help of Olympic BMX gold medalist Charlotte Worthington to be the face of InvestSmart online in the hopes of appealing to young and inexperienced investors.
If you’re interested in learning more about InvestSmart, you can find campaign videos and content on various social media platforms under the #InvestSmart hashtag.