The Financial Conduct Authority has launched a campaign targeting new investors after it found 1m people have turned to high risk investments during the pandemic.
The campaign, called InvestSmart, has launched today and is to run over five years. It will cost about £11m.
It targets those who are inexperienced at investing and aims to reach investors through social media and online, where much of the hype around investment happens for young people, according to the regulator.
The FCA said 1m UK investors had increased their holdings, or bought a high-risk investment during the pandemic (April-October 2020) and the majority of those who purchased forex or crypto (57 per cent and 69 per cent respectively) incorrectly believed these to be regulated by the FCA.
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 City watchdog said the campaign was part of its consumer investments’ strategy, which was launched in September.
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."
Alongside its campaign, the FCA commissioned a survey, done by Opinium, which found many young investors were driven by competition and influenced by “hype”.
The survey asked 1,000 people aged 18-40 about their investments in high-risk products.
Of the respondents, three quarters (76 per cent) said they felt a sense of competitiveness when placing their money in an investment, with over 68 per cent likening it to gambling. Few of those surveyed were investing for the long haul.
Just one in five respondents (21 per cent) were considering holding their most recent investment for more than a year, and fewer than one in 10 (8 per cent) for more than 5 years.
This was despite 60 per cent saying they preferred more stable returns than investments that rise and fall dramatically.
The FCA said hype on social media and in the news was driving new investors to take up high-risk investments.
Around 58 per cent 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.
To bring the message home the FCA has joined forces with Olympic BMX Gold medallist Charlotte Worthington.
Worthington said: “BMX is about big risk, and big reward – but it has taken a lot of preparation to get to this point, with highs and lows and hours of training to get the basics right one trick at a time. Anything high risk might not always go to plan, it’s about being prepared and minimising your risks through research and information.