I’m not going to discuss whether people should be prevented from buying cryptoassets, or even whether some firms involved in this area are best avoided, I will just say that cryptoassets are not something anyone should put their life savings into, or even the cash they planned to spend on their next holiday.
With that in mind, the figures are truly amazing - the full story we’ve covered this week are here:
I will not repeat all the details as you can read those for yourself in the story but the YouGov study for the FCA estimated:
• 2.6m UK consumers have bought cryptoassets so far
• 1.1m have bought them in the past year
• 87% of UK buyers of cryptoasssets buy them through non-UK exchanges
The FCA study estimated that 300,000 were generally “knowedgedable” about the cryptoassets they bought. This is about 10% of the total and implies the other 90% only vaguely understood the risks, the financial equivalent of buying off the back of a lorry.
If this is correct, the British public are a lot dumber than we think and Financial Planners have a huge mountain to climb to persuade people about the benefits of sensible, long term, carefully-sifted investing.
The FCA said that crypto adverts, I suspect mostly online, played a big part in persuading people to invest in something they mostly did not understand. This is a job for the Advertising Standards Authority for sure.
So why is this news and why is it important for Financial Planners?
Firstly, it’s important because the Chancellor is looking at regulating the marketing of cryptoassets later this year which could result in significant change. It could also add to the FCA’s workload and push up regulatory costs.
Secondly, it’s a reminder again that the public are easily led. I wonder how many people convinced to invest in cryptoassets thought first about all the basic Financial Planning needs they have, from rainy day savings to building a nest egg to planning for retirement. Few I suspect.
As I’ve mentioned before, the failure of internet firms and search engines to apply any sort of protection for consumers on financial ads is appalling. Most of the clone scam firms we cover are based overseas but often target UK investors via bogus ads and websites. The search engines take the ad money and provide little but a channel to reach vulnerable and naive investors.
In financial services terms the internet is the Wild West and it’s time the cavalry arrived.
Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks.