Apps are creating new generation of FX and Crypto investors – FCA research

Rick Steves

The FCA-commissioned study found that 38% of those surveyed did not list a single functional reason for investing in their top 3.

The Financial Conduct Authority (FCA) has published a research report on the profile of crypto and FX investors.

“A new, younger, more diverse group of consumers getting involved in higher-risk investments, potentially prompted in part by the accessibility offered by new investment apps” is on the rise, the paper said.

On the downside, the study finds “these higher-risk products” to be unsuitable for many of these consumers’ needs. Nearly two-thirds (59%) said a significant investment loss would have a fundamental impact on their current or future lifestyle.

High-risk investors search for the thrill of investing and the status that comes from a sense of ownership in the companies they invest in. “This is particularly true for those investing in high-risk products for whom the challenge, competition, and novelty are more important than conventional, more functional reasons for investing like wanting to make their money work harder or save for their retirement”, said the report.

The FCA-commissioned study found that 38% of those surveyed did not list a single functional reason for investing in their top 3.

Sheldon Mills, Executive Director, Consumer and Competition at the FCA said: “Much of the consumer investments market meets consumers’ needs. But we are worried that some investors are being tempted – often through online adverts or high-pressure sales tactics – into buying higher-risk products that are very unlikely to be suitable for them.

“We want to make sure that we encourage the ability to save and invest for lifetime events, particularly for younger generations, but it is imperative that consumers do so with savings and investment products that have a suitable level of risk for their needs. Investors need to be mindful of their overall risk appetite, diversifying their investments, and only investing money they can afford to lose in high-risk products”, said Mr. Mills.

Despite their high confidence and knowledge claims, these high-risk investors show a lack of awareness and/or belief in the risks of investing, the research found.

Over 4 in 10 don’t view ‘losing some money’ as one of the risks of investing and 78% of them have a strong reliance on gut instinct and rules of thumb.

More reliant on contemporary media (e.g. YouTube, social media) for tips and news, the new investor profile skews more towards being female, under 40, and from a BAME background, but seems to have the lowest levels of financial resilience, the report states.

“Research showed that a significant loss could have a fundamental lifestyle impact on 59% of self-directed investors with less than 3 years’ experience, who are more likely to own high-risk investment products, compared with 38% of investors with greater than 3 years’ experience.”

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