FCA survey finds most young investors driven by competition, social media hype
The UK Financial Conduct Authority (FCA) today published the findings of a survey of young investors. The survey covered 1,000 people aged between 18 to 40 who invest in one or more high-risk investment products, such as Forex, CFDs, cryptocurrencies and binary options.
Three quarters (76%) said they felt a sense of competitiveness when placing their money in an investment, with over two thirds (68%) likening it to gambling. Few of those surveyed were investing for the long haul.
Just 1 in 5 respondents (21%) were considering holding their most recent investment for more than a year, and less than 1 in 10 (8%) for more than 5 years. This is despite 60% of those surveyed saying that they prefer more stable returns than investments that rise and fall dramatically, investments that typically come with lower returns requiring longer investment.
Hype on social media and in the news is driving new investors to take up high-risk investments. 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 investments.
This comes as over 1 million UK investors (6%) increased their holdings, or bought a high-risk investment during the pandemic (April to October 2020).
The regulator is concerned that new investors are increasingly accessing higher-risk investments which may not be right for them, or reflect their risk tolerance.
The new research found that majority of those who purchased crypto (69%) 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.
The FCA has joined forces with Olympic BMX gold medallist Charlotte Worthington. Charlotte is highlighting the pitfalls of high-risk activities, and the need for proper preparation before attempting them. Charlotte made history as BMX Freestyle’s first women’s champion at the Tokyo Olympics.
To help investors make the right call for them, the FCA is today launching an £11m 5-year campaign, InvestSmart. The campaign targets those who are inexperienced at investing, possibly dipping their toe for the first time. The campaign aims to reach those investors through social media and online, where much of the hype around investment happens. The campaign asks investors to consider their appetite for risk and to ignore the hype, directing them instead to advice available on the FCA’s website.
The campaign is part of the FCA’s consumer investments strategy, which was launched in September. This 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.’