The UK’s financial watchdog has warned Brits against the dangers of unregulated financial advice today amid fears that social media influencers are peddling crypto and forex trading as a way out of a cost of living crunch.
The Financial Conduct Authority has been ramping up its warnings over crypto trading and promotional material in recent months as a cost of living soars, with chief of the regulator Nikhil Rathi consistently warning that investors should be prepared to lose “all their money” in speculative bets on digital assets.
But some unregulated influencers on platforms like YouTube and TikTok have been looking to pounce on the crisis to promote ‘trading academies’ and suggest crypto and forex trading can shield themselves from a squeeze.
In a promotional note seen by City A.M, one trader with over 100,000 Instagram followers who cites convicted criminal Jordan Belfort as inspiration, said “with the cost-of-living crisis looming large over millions of cash-strapped Brits […] ‘people can trade their way out of a crisis – as long as they’re sensible with it.’”
The trader in question claims to have earnt a personal wealth of “nearly £2m”, after losing all of his father’s savings and then “trading wisely”, including by “buying Bitcoin when it was cheap and selling the cryptocurrency when the price peaked”.
“I became successful at trading by learning the hard way, understanding that I could only save myself after losing all that money,” he said.
The comments have sparked concerns over unregulated financial advice, with the Financial Conduct Authority yesterday telling City A.M. that “people should always be wary of any promotion made by someone who is unauthorised as you are very unlikely to have any protection if things go wrong.”
“We have been working with the government to ensure financial content is included within the Online Safety Bill which will mean tech and social media companies will need to play their part in helping to protect consumers,” a spokesperson for the FCA added.
“If you’re struggling with the rising cost of living, then help is available – contact your lender or MoneyHelper for support.”
Personal finance analyst at interactive investor Myron Jobson backed the comments from the watchdog and said that trying to “trade your way out of a crisis” was a “recipe for sleepless nights”, and could “leave you short amid the rising cost of living”.
“Always take investment advice on social media with a pinch of salt and always check the credentials of those giving the advice. It is important to use trusted sources when doing your research,” he added.
The FCA and UK’s advertising watchdog have been looking to clampdown on the promotion of crypto products this year, with the latter body rolling out rules in March that prevent firms from stoking a ‘fear of missing out’ on crypto prices, as well as implying in advertising that crypto products may be low risk.
“We’re concerned that people might be enticed by ads into investing money they can’t afford to lose, without understanding the risks,” the ASA’s chief executive Guy Parker said in March.
The FCA has also been tightening the guardrails on crypto firms more widely by requiring firms to win full authorisation to provide crypto services in the UK.