29/08/2023 It’s easier to find a partner than a
good investment. Social media can play a big role in finding both but it’s not easy to avoid
the hype, says the Financial Conduct Authority (FCA). And brokers need to be attentive
because the regulator is watching.
Only one-in-five young people are able to discount
investment hype on social media, according to a new survey from the UK’s FCA. By contrast, a
third were able to cut through the noise when it came to dating.
Much of this may be down to confidence – people are
generally more used to dating and social media, while the worlds of investing and finance
can seem out of reach. But it does highlight how brokers need to be straight with consumers
when it comes to digital marketing, especially on social channels that may see ads land with
people who do not possess the necessary knowledge or experience to trade leveraged products.
Investment Time Horizon
While
half (48%) of those surveyed said they are dating to find a potential life partner, their
investment outlook is far shorter. Just 2% of investors have a timeframe of more than 5
years in mind when investing and 14% have no timeframe in mind at all.
But a get-rich-quick mentality is not the way forward.
Keep long term goals in mind, says the FCA, as this could “help over-ride hype and
smooth out the effects of market ups and downs”. Brokers may find that offering more
education directly to clients will be of value and could help them show they are meeting
Consumer Duty obligations.
Red Flags
The FCA have found that
men are more likely to continue with a date despite spotting a red flag (49% compared to 39%
of women). They are just as obstinate with investing – they are more likely to push on with
an investment after identifying a warning sign (39% compared to 28%).
“Ignoring red flags and investing regardless may put
money at higher risk, reinforcing the importance of checking if the investments are
regulated and of conducting thorough research to ensure an investment is right for
individual circumstances,” says the FCA.
This is analogous to identifying risky behaviour in
clients’ trading. Clients letting losers run and cutting winners is almost a proverb. The
FCA, via the Consumer Duty, has made it pretty clear that brokers need to take action when
they see clients carrying on with behaviour (trading) that could cause harm; for instance
losses exceeding known savings/earnings.
The survey comes as part of the FCA’s InvestSmart
campaign and hot on the heels of the launch of the Consumer Duty, and underlines the
increasingly attentive stance the regulator is taking in terms of consumer outcomes.
Neil
Wilson
Chief Market Analyst at Finalto
Source:
FCA finds young investors are
more likely to have long-term goals in mind when dating than when investing
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