Finance Watch warns of online tactics designed to influence retail investors

Finance Watch, a non-profit organization, has released a report warning of deceptive online design patterns that can mislead retail investors. The report, which analyzed websites, apps, and financial influencers across Germany, Spain, Czechia, and Hungary, identified several common tactics. Influencers often give uninformed advice, present trendy investment lists, recommend pre-selected investment amounts, and employ countdowns to create a sense of urgency. Prominent "buy" buttons on screens also play a role in steering investment choices.

The report emphasizes that potential returns are frequently emphasized while information about risks is placed in less visible or collapsible sections. Senior officer Peter Norwood of Finance Watch urged EU policymakers to introduce new legislation to restrict or ban such practices at the upcoming Digital Fairness Act. The European Commission is expected to present the proposed legislation, which aims to protect consumers from unfair or manipulative online practices.

Finance Watch also recommends stricter regulation of 'finfluencers' and calls for a ban on their promotion of retail investment products. They argue that financial education is crucial and should not be used as a disguise for advertising or unqualified advice. The European Union is focusing on increasing financial literacy in the bloc, recognizing that limited financial knowledge is an obstacle to making Europe competitive globally.

A 2023 Eurobarometer survey showed that only 18% of EU citizens reported having a high level of financial literacy, which may leave consumers less equipped to navigate financial products and services online.