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FCA announces campaign to protect consumers from investment fraud

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FCA announces campaign to protect consumers from investment fraud. Photo: Reuters
Some 6% of consumers increased their holdings of higher risk investments during the pandemic. Photo: Reuters

The UK’s financial regulator wants to give consumers the confidence to invest without worrying about being scammed or being pushed into putting their money in products that could be too risky for them.

The Financial Conduct Authority (FCA) has set itself the aim of moving 1.7 million people with over £10,000 ($13,825) in savings into investment by 2025. 

“We share the FCA’s ambition to drive higher rates of retail investment," said Chris Hill, CEO of financial services company Hargreaves Lansdown.

"For too long consumers have not achieved the rates of return that they could have done, had their savings been invested. This holds back their ability to build their financial resilience over the longer term."

One of the FCA's aims is also to reduce the money consumers lose to investment scams. Consumers lost nearly £570m to investment fraud in 2020/21 — the figure has tripled since 2018.

The FCA wants to halve the number of consumers who are investing in higher risk products that are "not aligned to their needs."

Read more: UK fintech Wise beta tests index investing for select customers

The regulator said the consumer investments market accounts for £1.6tn held or invested by consumers through the services of over 6,000 wealth managers, advisors and investment platforms.

Some 6% of consumers increased their holdings of higher risk investments during the pandemic, with 45% of self-directed investors saying they did not realise the risks.

The FCA will explore regulatory changes to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products.

It will also launch an £11m investment harm campaign, to help consumers make better-informed investment decisions.

It hopes to be “more assertive and agile” in how it detects scams and takes action against scammers.

'Investors have never had more freedom — technology has democratised the market, new products have become available, and people have better access to their life savings than before," said Sarah Pritchard, executive director of markets at the FCA.

Read more: FCA pledges crackdown on fraud following LCF minibond scandal

“But that freedom comes with risk. We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk.”

The FCA has already taken action to improve the market, for instance by banning the mass-marketing of speculative mini-bonds.

Hill said that in addition to the FCA's plans, "firms at the centre of the investment space could do so much more to guide clients through their life time as an investor.

"This would both build confidence in investment and help fight scams, with better informed consumers.”

Watch: How to prevent getting into debt

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