Article by Phil
We’ve been here many times before, but once again investing advice tips online are back in the spotlight.
This time its TikTok causing the problems. The Financial Conduct Authority (FCA) has said that almost 70% of the influencer video investing advice tips break the rules. The videos were analysed by compliance specialist Adclear. On average the videos reviewed had almost 300,000 views although some had over one million views. Rule breaches included:
- Not making sponsorship influence clear.
- Not making it clear that the videos were not financial advice.
- No warnings about the potential to lose money.
- Making claims about unverified high rates of return.
- Promoting unregulated high-risk products without making that clear.
Sadly, Barclays research found that:
- 25% of young people felt pressured by these types of videos.
- Over 40% of people admit to having lost money as a result of their investments in these online schemes and products.
The FCA says that it is cracking down and there are court cases pending in the system.
Banks back in the investing advice market again.
Having been largely absent from investing advice since 2012, a number of Banks are now starting to creep back into the market. Although many Bank products under performed in the past, they are certainly nowhere near as bad as those found online.
Those back in the market include:
- HSBC – targeting customers with over £100,000 in savings. Fees are said to be 1%.
- Barclays – targeting customers with over £250,000.
- Nat West – looking for clients with over £250,000 and said to be charging a flat £7,500 + VAT fee.
- Lloyds – who have broken away from their relationship with Schroders and looking for customers with incomes over £100,000.
Remember, the Banks are not independent financial advice firms. Also remember that the Banks don’t always automatically offer their customers the best deal available. For example, research by Spring into savings account offers found the following:
- 57% of Banks put restrictions on the number of withdrawals.
- The headline savings rate on 77% of accounts ended after 12 months and on average the rate then dropped by 2%.
- In some cases the savings rate then dropped to 1%.
- 25% of Banks needed the customer to also open a current account to qualify for the best savings rate.
Expect similar behaviour when it comes to their investing advice.
Is crypto really bad?
Historically the FCA has always maintained that investors in crypto should expect to lose all their money. In other words, if you can afford to lose everything you’ve put in then that’s OK because you’ve accepted the risk. However, it seems that things are changing. The FCA is now looking to open up the crypto market for investors in the UK but under strict controls. (I’m not sure that should bring anyone any confidence given the FCA’s track record in spotting investment risks… think Woodford as one example.)
There’s no denying that crypto investments seem to be growing in value and those hold the “asset” may well do well. But as long-standing FT Adviser journalist Nic Cicutti says “crypto has no economic value. It is not linked to any productive capacity, does not generate income and is not backed by any fiscal regime or tax system”. It’s essentially fresh air, or numbers on a computer screen.
The Guardian also summed it up by saying “What props it up is not actual cashflow but expectation: the hope that someone else will validate today’s valuation, tomorrow.”
I’ll let you decide. But don’t let FOMO drive your decisions.
Always check that the investing advice business exists
It’s best practice to always check that anyone who may be providing you with investing advice, regardless of where you found them, is genuine.
To help with this the FCA has just launched a new Firm Checker tool. This will help you check the credentials of a firm. It also helps you to understand whether a business is authorised to provide the type of investing advice that you are looking for. It’s very helpful and may help to combat the number of scams reported every year, which currently stands at 800,000 a year.
Number of claims down
Some good news from the Financial Ombudsman Service (FOS). In their latest annual report, the number of claims from Claims Management Companies (CMC’s) and law firms has fallen from 153,000 to 40,000. A fall of over 70%. This is a direct result of the introduction of fees to bring complaints. Which just goes to show how many unfounded and spurious cases were being brought into the system previously.
On the flip side FOS are expecting another 150,000 claims next years on the back of the introduction of targeted advice as a lightweight alternative to full financial advice.
Get more information.
If you need investing advice then why not contact Christina today. She offers a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
