City watchdog launches new campaign aimed at retail investors

The regulator says that investors who have been scammed lose an average of 22 years’ pensions savings, equivalent to three times their annual earnings.

The Financial Conduct Authority (FCA) has announced a new campaign in a bid to help retail investors make better and more informed choices.

Outlined as part of its 2020/2021 business plan, which sets out the regulator’s objectives for the next one to three years, the FCA says it hopes to help savers make better-informed investment decisions. In particular, the new campaign will target consumers investing in high risk, high return, illiquid investments.

The FCA highlights the importance of pensions and retail investments for building long-term savings and providing an income in later life. However, it notes: “When these sectors work poorly, consumer losses from unsuitable investment decisions, or fraud, can be catastrophic.” The regulator points out that investors who have been scammed lose an average of 22 years’ pensions savings, equivalent to three times their annual earnings.

The shift from defined benefit to defined contribution pensions schemes (for those typically under the age of 40) has placed the onus on individuals to take control of their financial future. In turn, this increases the risk of poor investment decision making.

Moreover, the introduction of pension freedoms in 2015 has also heightened this risk. With this in mind, the FCA notes: “We want to make sure they are supported to make effective investment choices in a fair market. To achieve this, we will target three outcomes.”

These are:

1. Ensuring investment products are appropriate for consumer needs. The FCA warns that some investors are exposed too high investment risk than is appropriate. This is often the result of being sold products with a higher risk than investors realise. The FCA hopes to “ensure products are designed to meet consumers’ needs, deliver value for money, and are marketed in a fair, clear and not misleading way.”
2. Second, the regulator wants to help investors make “effective decisions” about their investments. According to the regulator, investors need access to higher quality advice and support, particularly so they are better aware of how to protect themselves against scams or fraud.
3. Third, the FCA hopes to ensure that companies selling in investment products adhere to a “higher standards of governance.” The regulator also aims to ensure that the “regulatory system can better tackle the significant cost of misconduct we see in this market.”

The regulator had previously launched a campaign to attempt to reduce retail susceptibility to scams promoted on social media. Known as ScamSmart, the campaign provides those at risk of scams with knowledge of the warning signs of scams and the actions they can take to avoid them. The campaign was delivered through TV, print, radio and digital advertising.