Social media – love it or hate it – is here to stay. There are 45 million active social media users in the UK in 2021 – that’s 66% of the population. That’s not surprising, as it’s great for a whole range of things, but it poses a big risk to our financial health.
The Financial Conduct Authority (FCA), the body that regulates retail financial services in the UK, is concerned about the increase in fraud and scams over the past 18 months. Many of the scams (often featuring cryptocurrencies), appear on social media. The regulator is so concerned that it has warned social media platforms like Facebook and Twitter about what it calls ‘dodgy’ investment adverts on their platforms.
The regulator said this week, that it’s working with social media platforms to fix their procedures. And just in case there was any doubt about what it meant, it went on to say, ‘we are putting them on notice that we expect them to be involved in this process of protecting the community’. In other words, it expects social media platforms to become part of the solution rather than part of the problem.
That problem is now widespread, and scams are becoming more and more sophisticated. If one is shut down, several more pop up in its place shortly after. The FCA is looking for much more proactivity from the Facebooks and Twitters of the world to help stop these ads appearing in the first place.
Besides working with these platforms, the regulator is also tackling online scams and fraud by developing its ScamSmart website. ScamSmart provides information on how to spot and avoid the types of fraud that are being used by scammers right now. The website also holds a list of firms that have been reported as offering investments but are not regulated — in other words, firms we should avoid.
Getting worse before it gets better
If you need any convincing about how big a problem online scams have become, the regulator currently has 1,700 cases open against firms that are targeting consumers with high-risk investments or scams.
Last year in the UK, people lost £570m to investment fraud and scams. The situation has become much worse with the amount lost tripling since 2018.
Beware of celebrity endorsements
Just a couple of weeks ago, a well-known US-based reality star was criticised by the head of our regulator for promoting an untested cryptocurrency on Instagram. He said it was a “speculative digital token created a month before by unknown developers”.
In fact, it was so new and untried that it was impossible for him to tell whether it was real or an outright scam. If the head of the FCA couldn’t tell whether it was real or not, then there is no way anyone else viewing the ad on Instagram would be able to tell either.
Choose your information source wisely
With all the information available online from asset management companies and investment platforms, not to mention reputable news sources, there’s no need to use social media platforms to steer financial decisions.
In fact, using social media to decide where to invest your hard-earned money, find debt solutions, accessing your pension, or anything else to do with your finances, could lead to substantial problems.
If you want information, advice or guidance, the advice is simple – use proper channels and check the regulator’s ScamSmart website.
Use our simple calculator to help you make informed decisions about which investment platform to use.