The regulator recently surveyed investors on how they view and access high-risk investments.

The research found that the current small-print warnings mandated by the FCA were not an effective tool at educating investors about risk before they invest.

Consumer research often highly influences the FCA’s policy decisions, indicating that the regulator may now look to change the rules surrounding risk warnings.

In an article summarising the findings of the research, the FCA said 45% of the self-directed investors it surveyed were not aware that "losing some money" was a potential risk of investing.

The FCA commissioned the research following an increase in money being invested in high-risk investments during the Coronavirus pandemic.

It looked at the behavioural science around how investors are making decisions, including the impact of risk warnings and self-certification of risk awareness.

As part of its research, the FCA conducted online experiments testing risk warnings against introducing an FAQ-style disclosure about key investment risks and testing making changes to the self-certification process.

When testing a range of redesigns to risk warnings on test promotions, the standard small-print ‘your capital is at risk’ rule for financial promotions was found to be ineffective.

The FCA said: “This risk warning does not clearly convey the potential losses to consumers and is often perceived as ‘white noise’ by investors.”

The regulator found that when it tested “behaviourally-informed disclosures”, they enhanced participants’ understanding of risk because of increased prominence, simplified text and clearer explanations. They also reduced the chance of participants recommending the investment to a friend.

The research also found that “customers do not understand the impact of self-certifying” their understanding of risk and may just be clicking through the process without properly considering whether the investment met their needs.