Young investors handed warning as investment schemes may be illegal | Personal Finance | Finance
Younger investors have been warned they could be unknowingly handing over their cash to illegal investment schemes. Vulnerable people are increasingly making risky financial decisions as people turn to social media and trading apps to get investment tips.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, told Express.co.uk: “Many investors who put money into high-risk products appear to be thrill seekers, investing for a challenge and for competition and for the novelty factor rather than conventional reasons like saving for retirement.”
Research from the group found 28 percent of the lowest-income households are investing compared to just 10 percent of the wealthiest households. Ms Streeter said celebrity-backed investments are a particular risk as they may turn out to be illegal.
She explained: “The Financial Conduct Authority (FCA) has been reminding celebrities and other influencers about the risks they run if they don’t understand the rules. If they promote financial products that are subject to regulation without approval of an FCA authorised person, they may be committing a criminal offence.
“The Advertising Standards Authority expects influencers to label content as an ad upfront if they get any form of payment, and this must include affiliate links. For high-risk promotions, warnings need to be displayed throughout the promotion and not hidden or obscured by designs or features on a social media platform.”
The FCA previously clarified the guidelines after seeing the effect of celebrity endorsements for investment schemes.
Ms Streeter said: “The watchdog was prompted to issue warnings after Kim Kardashian promoted Ethereum Max in 2021 without disclosing to her followers she had received money to do so. Soon after the FCA said that it may have been the financial promotion with the single biggest audience reach in history, given the huge size of Ms Kardashian’s following, which currently stands at 364 million. She was subsequently fined $1.26 million, by the Securities and Exchange Commission.”
The expert said it is encouraging that social media is attracting a new generation into investing but people need to take care.
She said: “What is concerning is that it’s often on posts or in chat rooms on social media where speculation surrounding hot stocks and more risky investments runs rife.
“Interestingly, faced with the competition from social media, newspapers have been making efforts to attract this age group, and it seems to be paying off.
“The number of investors aged 18-24 years who get investment information from newspapers has almost doubled from 12 percent in 2021 to 23 percent this year.”
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