City watchdog launches blueprint to protect consumers from scams and risky investments

The City watchdog has launched a brand new strategy today designed to cut the amount of money consumers lose each year from risky investments and scams.

The Financial Conduct Authority (FCA) has set new targets to measure its effectiveness at protecting consumers from harm resulting from investing, aiming to cut the number of people investing in high risk products in half in just four years.

The FCA has also set itself the goal of reducing the scale of money retail investors lose from scams each year, which reached £570m this year. This sum has tripled since 2018, prompting the regulator to become more heavy handed in protecting consumers.

Opportunities for scammers to conduct financial crime have grown in recent years with new technology making it easier for consumers to invest their savings. The collapse of investment firm London Capital and Finance has also brought the FCA’s role in protecting consumers from risky investments into sharp focus. 

Sarah Pritchard, executive director of markets at the FCA, said: “We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk.”

“Investors have never had more freedom – technology has democratised the market, new products have become available, and people have better access to their life savings than before. But that freedom comes with risk.”

The watchdog will launch a fresh campaign to educate consumers on the risks of investing to make sure they make better decisions with their money. 

It is aiming to reduce the estimated 20 per cent of consumers missing out on investment gains by holding too much cash. 

The pandemic has swelled household savings due to lockdown measures reducing spending, causing many households to miss out on potential higher returns offered by mainstream savings accounts, Laura Suter, head of personal finance at AJ Bell, said.

“The issue is that lots of these people feel unable or ill-equipped to start investing. Anything the regulator can do to make taking that leap into the stock market for the first time easier and to allow providers to offer more hand-holding should be applauded.”

Regulations could be relaxed to make it easier for financial services firms to provide advice to consumers, the FCA said.