If it looks too good to be true…

09 November 2021

I always thought that a Fiat was a spirited continental car, that could be somewhat temperamental, usually as it aged. However, I saw a headline referring to 'fiat money' or currency, in the context of cryptocurrency and the government authorisation of a legal tender. To be clear, cryptocurrency is not a legal tender, and this sparked my interest. You can surmise that legal tender is subject to far greater control (and indeed regulation) than a cryptocurrency.

The number of unregulated investments (cryptocurrency or otherwise) seems to be on the rise and is, where appropriate and possible, a focus for regulators whose aim is to protect consumers. Understanding what you are investing in is not always that easy, and some investment markets and conditions (for example, when there is significant volatility) may not work in the way that an investor had anticipated. The old adage of 'if it looks too good to be true, it usually is' is invariably reasonable in this context.

The channels and formats of information distribution have also changed significantly with social media and the like, allowing vast amounts of communication with the public at a few touches of a laptop. The demographic that receives this information is usually at the younger end of the investment age range and may be swayed by influencer endorsements, as we have seen in the press in recent months (after the UK regulator has caught up with some). Ironically, the Financial Conduct Authority (the FCA) is now using influencers themselves to warn people about high-risk investments through an awareness campaign, as detailed by the BBC in mid-September 2021. More here: https://www.bbc.co.uk/news/business-58572575

There are a few things that you might want to look out for, including the following:

  • Did you make the approach to invest, or were you invited (a direct approach is sometimes a sign of a scammer)
  • If you don't recognise the name of the business making the offer, check them against the FCA register here: https://register.fca.org.uk/s/ If authorised, this may provide you with some protections through sources such as the Financial Services Compensation Scheme.
  • Do you know whether the investment is regulated by the Financial Conduct Authority or unregulated? Do you understand what you are investing in and how much you could lose if it goes wrong?
  • If the recommendation comes from an adviser, are they listed on the FCA register?

If in doubt, take advice from an authorised adviser who can help, or at least guide you as to the risks and potential scams that are sadly plentiful at the moment.

Be careful, and remember please, if it looks too good…

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899