Research Notes: Improving outcomes for consumers considering investing in high-risk investments

We’ve published 3 Research Notes on behavioural interventions we tested to improve outcomes for consumers that are considering investing in high-risk investments.

Going beyond ‘capital at risk’: Behaviourally informed risk warnings for high-risk investment products (PDF)

Pausing, reading, and reflecting: decision points in high-risk investment consumer journey (PDF)

To certify or not to certify: decision points in the self-certification process (PDF)

Summary

We investigated ways to reduce the harm to consumers when they consider investing in high-risk investments that may not match their risk tolerance. 

We carried out 3 separate online experiments to test ways to help consumers understand the risks involved in high-risk investments and decide when they may be unsuitable for their needs. This programme of behavioural research has informed the range of measures we proposed in our consultation on strengthening our financial promotion rules for high-risk investments (including cryptoassets) (CP22/2).

We briefly describe our 3 experiments and the findings below. We’ve since published a more detailed summary of this research

Going beyond ‘capital at risk’: Behaviourally informed risk warnings for high-risk investment products

The standard risk warning for financial promotions, ‘Your capital is at risk,’ is often seen as white noise by investors. We tested this standard wording against warnings with clearer information about the specific risks, presented more clearly, informed by behavioural science and linked to further information.

Pausing, reading, and reflecting: decision points in high-risk investment consumer journeys

We tested the effect of introducing other ’decision points’ into the high-risk investment consumer journey. Decision points are small obstacles that slow down consumers and encourage a brief moment of reflection, which can support better decisions. The decision points tested included relevant and simple FAQ-style information, as well as checkboxes, manual-input fields, and pop-ups.

To certify or not to certify: decision points in the self-certification process  

We looked at the current self-certification process and tested interventions to improve this. We tested the introduction of decision points, such as active choice checkboxes for consumers to select which self-certification criteria they meet and free text boxes for consumers to provide evidence that they do in fact meet these criteria. 

What was found

We found that our behaviourally informed risk warnings improved participants’ understanding of risk across the board. Similarly, decision-points in the form of short FAQ-style information improved understanding of risk and improved assessments of how risky these investments are. We also saw that both the behaviourally informed risk warnings and decision points (in Research Note 1 and 2, respectively) reduced the chance of participants recommending the investment to a friend. The experiment in Research Note 3 showed that the introduction of decision-points reduced the number of participants self-certifying as eligible to invest in high-risk investments. 

Authors

Research Note 1 written by Dunvel Delias, Flo Farghly, Lucy Hayes, Cherryl Ng, and Max Spohn.

Research Note 2 written by Flo Farghly, Lucy Hayes, Cherryl Ng, and Max Spohn.

Research Note 3 written by Cameron Gilchrist, Lucy Hayes, Cherryl Ng, and Max Spohn.

Disclaimer

Research notes contribute to our work by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence we may use to discharge our functions and inform our views. We strive to ensure research outputs are accurate, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that research notes contain any errors or omissions, they should be attributed to the individual authors, rather than the FCA.

Page updates

02/02/2022: Link added Link to a more detailed summary of this research
20/01/2022: Link added CP22/2 added to More information links