On 23 March 2021, the FCA published a research report that seeks to gain a better understanding of investors who engage in high-risk investments like cryptocurrencies and foreign exchange.

The research report shows that there is 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. However, there is evidence that these higher risk products may not always be suitable for these consumers’ needs as nearly two thirds (59%) claim that a significant investment loss would have a fundamental impact on their current or future lifestyle.

The research also shows that investors often have high confidence and claimed knowledge. However, it notes a lack of awareness and/or belief in the risks of investing, with over 4 in 10 not viewing ‘losing some money’ as one of the risks of investing, even though as with most investments their whole capital is at risk.

The research found that these younger investors may have the lowest levels of financial resilience making them more vulnerable to investment loss. 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.

Alongside the publication of the research report, the FCA has launched its digital disruption campaign to prevent investment harm.

The FCA advises consumers to consider five important questions before they invest:

  1. Am I comfortable with the level of risk?
  2. Do I fully understand the investment being offered to me?
  3. Am I protected if things go wrong?
  4. Are my investments regulated?
  5. Should I get financial advice?