Finance
Warning over alarming Gen Z investment trend as Australia mulls potential ban
There’s a famous quote attributed to J.P Morgan, the early American financier and banker whose name now adorns the largest investment bank in the world.
“Nothing so undermines your financial judgement as the sight of your neighbour getting rich,” he said.
Social media these days is full of people touting the next big undervalued stock or crypto coin and showing off their gains from investing in speculative markets. And according to new research, it is actually younger, more internet native generations who are more likely to follow dubious investment advice and fall for investment scams online.
It comes as regulators in Australia push for better financial literacy to counter the AI boom and consider cracking down on advertisements of financial products.
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Chairman of the Australian Securities and Investments Commission (ASIC), Joe Longo, has warned about the proliferation of promotions for financial products, particularly through social media, suggesting they posed a danger to Australian consumers.
Highlighting previous rules to ban cigarette advertisements, Longo flagged a potential crackdown on such advertisements as the watchdog looks to close gaps in the regulatory regime governing the financial services sector.
“Particularly through social media, there’s a whole range of ways in which Australians are exposed to pretty aggressive financial product promotion,” he said.
“So I think we need to be looking for ways of helping Australians navigate that. And secondly, possibly even looking at restrictions or prohibitions of some kinds of advertising, to nip it in the bud.”
The ASIC chair, whose stint as head of the regulator ends on May 31, said the government was intent on pushing more funding towards literacy about both financial products and technology as it prepares for the expected rise of AI agents which are capable of independently performing tasks with minimal human input.
“The whole question of literacy around technology is related to financial literacy, because we’re seeing a convergence.
“So many financial products are promoted through a range of these technologies or platforms. So I do worry that, as a community, we’re not investing enough in our level of understanding around these issues.”
AI has helped fuel an explosion in advertisements spruiking questionable investments in financial products.
ASIC is already discussing law reform around limiting cold calling and lead generation, which drove customers to invest in the collapsed Shield and First Guardian master funds.
“But generally, we’re talking about advertising that isn’t regulated,” Mr Longo said
“So what we’re calling for is greater consideration of whether that kind of advertising should be restricted in some way, or carrying with it warnings that before you go ahead, you should get proper financial advice from a licensed financial advisor.
“We’ve just seen too many examples at the moment of people losing their money in circumstances where they’re investing their life savings, for example, chasing a higher return.”
January is peak season for scammers pushing investment advice as consumers look to rebuild their bank balance after the holidays.
New survey research from BrokerChooser, an online platform that compares stockbrokers, digital banks, and trading platforms, found that it was younger people who were most likely to overestimate their confidence in spotting an investment scam, with many still willing to engage with suspicious platforms.
Gen Z (20.21%) and millennials (26.53%) are over six times more likely than Boomers (3%) to say they’d test a suspicious trading platform with a small amount.
Almost one in five Gen Z respondents said they’d be convinced to invest in a new platform based on screenshots of profitable trades.
Meanwhile more than a third of 25 to 34-year-olds and nearly a quarter of 35 to 44-year-olds admitted they would trust testimonials from “other successful traders” – a fraudulent tactic commonly used in scams through fake or paid endorsements.
“A quarter of young investors admit to making impulsive decisions in order to keep up with current investment trends, often leaving little time to properly evaluate the risks. Amid a sharp rise in investment scams, this behaviour is particularly dangerous – especially as fraudsters grow increasingly sophisticated in how they present themselves,” Krisztián Gátonyi, from BrokerChooser, said.
“With the rise of AI, we’re now seeing realistic fake websites, chatbot ‘advisors’, and even deep fake videos of celebrities endorsing bogus schemes. It’s becoming harder for even seasoned investors to separate genuine opportunities from high-tech fraud.
“While younger adults tend to feel more sure of themselves, some are still falling for red flags like promises of unrealistic returns, unregulated platforms claiming to be ‘pending approval’, or pressure to act fast.”
The company said the survey was conducted with a nationally representative panel of 2,000 UK adults, and revealed the surprising groups being targeted by such advertising.
with AAP
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