Article by Phil
The Financial Conduct Authority (FCA) has re-iterated its stance that cryptocurrency is still not fit to be part of retail customer investments. The risk is still considered to be too high by the best financial consultants.
The FCA did relax its stance on crypto earlier in the year by allowing professional investors to take crypto risk. It also approved certain crypto trading on the stock exchange, following from the approval of crypto trading in the US.
The issue for the FCA is that if it authorised crypto to become part of regular retail customer investment portfolios, then it will have to provide the same protection to consumers through the Financial Services Compensation Scheme (FSCS). This is too big a risk to take with cryptocurrencies still regularly collapsing all over the world.
There is also the unregulated nature of crypto itself which is used to finance crime and illegal activity on a wide scale. If crypto was afforded authorised status it would be a green light for its related criminal activity to flourish.
It would also be UK financial institutions (including the best financial consultants like us) who would have to pick up the bill for any FSCS claims. That would be too big a financial burden for small independent firms to bear and could easily collapse the whole UK advice system. It’s long been our view that crypto is too high a risk and we won’t even discuss it with our clients. The FCA warning seems to be the right one and that is that you should be prepared to lose all your money if you invest in crypto. We are of the same opinion.
Despite advice from the best financial consultants, it is thought that almost 10% of people in the UK hold some investment in crypto.
ESG investments less popular
Not related to crypto, except in a sense that it’s a relatively new concept. The popularity of Environmental, Social and Governance (ESG) based investments is on the wane. Back in 2021 ESG was hugely popular with two thirds of investors saying that it was important to their investment choice. This has now fallen to less than 50% according to research by the Association of Investment Companies (AIC). The reason for the decline in popularity is twofold. Firstly, there has been a lot of adverse publicity about greenwashing and just how genuine their ESG credentials really are. The second is down to fund performance. ESG funds have generally been performing badly over the last 3-4 years.
Cybercrime on the rise
On a separate topic, the International Monetary Fund (IMF) of all people are warning of an increase in cyber-attacks on financial firms. Thankfully this hasn’t happened to us – yet! But please be careful if you are asked to reveal your private and personal details by e mail. The best financial consultants would never ask you to do anything like that. We would either call you or Christina would ask you for the information in person. Or to send it to us in the post.
The Financial Conduct Authority (FCA) have also issued a warning that Midlands based financial services firm Wealth Solutions (UK) Limited have been the victims of a cloning attack. Fraudsters are also calling people pretending to be acting on behalf of the firm. Please be vigilant.
The FCA has also issued warnings about the following firms which it believes are operating scams and are not authorised by the FCA.
- Crown Investment – a crypto asset firm trading from Worcestershire
- Epicassets – trading in FX and crypto assets from a London address with a USA-based telephone number
- Blockchain Investments – a crypto investment trading firm operating from a Worcester-based address and blockchaininvestments.finance
- Swiftfxtrading – an FX and cryptocurrency trading platform operating from St Vincent and the Grenadines, South Africa and the Seychelles with the USA-based telephone number swiftfxtrading.app
- GKFX – an FX, stocks and crypto trader operating from the British Virgin Islands and using a UK telephone number https://gkfx-global.io/
Be especially careful about financial services companies who are based abroad.
Be scam aware.
Over 6 million people have been the victim of a financial scam in the last year alone. That’s 12% of the population. The most common scams to look out for are:
- Purchase of fake goods or services online.
- Investment scams
- Bank account scams.
- Friends and family impersonation.
- Online technical support scams.
- Romance scams.
- Pension transfer scams.
- Tax refund scams.
- Lottery win scams.
It is affecting people’s confidence, with 40% of people now saying that they find it difficult to trust information especially online. Although there is some good news. According to trade body UK Finance the number of investment scams have fallen by 30% in the first half of this year. Although the amount of money lost to the scams has only reduced by a fraction.
Calls to accredit online “advice”.
Given the lack of trust online, there are increasing calls for social media companies to vet the credentials of the fin-influencers promoting products on their platforms. The FCA are already targeting unregulated advice and introductions online, especially on Facebook and TikTok. According to research from Barclays:
- 73% of people think that there should be an online verification system for the best financial consultants.
- 45% would like more transparency and as we’ve highlighted 40% say they feel unsafe online.
- But despite this 23% of people use social media to find financial “advice” and “experts”.
- Most said they use social media because it provides information in an easy-to-understand format, is quick and easy to use and importantly its free.
The only way to be sure is to check whether the fin-influencer is authorised. If they aren’t then you can’t trust what they are promoting/selling.
The FCA are continuing to crack down on fin influencers and have recently questioned twenty of them using their criminal investigation powers. This follows on from the FCA charging nine fin influencers back in May over an unregulated foreign exchange promotion online. The trial is set for 2027 and involves a number of so called “reality TV stars” from shows like TOWIE and Love Island.
In a recent study by Social Capital Markets, they found that over 70% of the financial advice online is “misleading”. That’s after they looked at 2,500 different videos on Tik Tok and You Tube. That’s shockingly high percentage.
Of the videos, they found that:
- 80% didn’t have the appropriate risk warnings.
- Almost 60% seemed to say that the investments would produce guaranteed returns. Which they certainly would not.
- 70% offered the chance to but specific shares without any detailed evaluation of the stock.
- Nearly half suggested investing a percentage of income.
- Just over 10% of the content creators were found to have any formal financial qualifications or authorisation.
It seems it’s still like the wild west online.
