When we think about the fear of missing out (FOMO), it’s often related to our social lives rather than finances. However, making quick decisions because you’re worried about missing out on a lucrative investment opportunity, for example, could mean you lose money.

Investment scams are on the rise. In 2008, over £197 million was reported lost, according to the Financial Conduct Authority. With the average victim losing £29,000, it’s a loss that could seriously affect your financial plans and security. Fraudsters use a variety of techniques to part their victims from hard-earned savings, with social media and other online channels being increasingly used.

One of the things criminals often play on is your FOMO. For instance, they’ll make bold claims about the returns you could expect and place time limits on the opportunity, encouraging you to part with your money before you’ve really thought it through.

But it’s not just scams that can lead to the FOMO influencing your financial decisions. Glancing at media headline figures, news or adverts without delving deeper into a financial offer could mean you end up choosing something that’s not appropriate for you. The recent case of London Capital & Finances has highlighted this.

What happened with London Capital & Finance?

Almost 12,000 people put more than £230 million into London Capital & Finance before it collapsed at the beginning of this year. Thousands of those that lost money were first-time investors who were lured by claims the firm’s products would deliver a market-beating return of 8%. But discovered the products were inappropriate and now face receiving no compensation.

For some, the confusion around the suitability of products stemmed from not understanding what was regulated. The company was regulated for the purposes of giving advice but not for selling bonds.

What’s more, the adverts for London Capital & Finances, without searching for further information, indicate that investors would be placing their savings into a low-risk ISA (Individual Savings Account) with risk spread through investing in hundreds of companies. The truth is, the fund did not qualify as an ISA and the money was invested in just a handful of companies, many of which were highly speculative.

As a result, the investment opportunity was suited to some investors with a high-risk attitude to investments and had other assets to diversify their overall portfolio. Many of those that poured money into London Capital & Finance have found their financial situation and risk profile doesn’t match this.

The case of London Capital & Finance is complex, with an investigation by the Serious Fraud Office underway. However, the administrators have suggested as little as 20% of the investment will ever be recovered.

Keeping the FOMO in check

It’s natural to not want to miss out financially. After all, you want to get the most out of your savings and investments. So, when you see an offer that claims to do just that, it can be incredibly tempting to take action right away. However, it’s important to keep the FOMO in check and balance this with an approach that helps make sure financial decisions are right for you.

  • Take a step back: Whilst the FOMO means it can be tempting to rush into decisions, it’s important to take a step back and give yourself some time to think. Even if there’s a time limit, don’t make a snap decision. Investment and saving decisions could affect your financial security for the rest of your life and should be carefully thought through.
  • Be cautious: Be aware that scams do happen. Often, we think it’ll ‘never happen to me’ but the FCA figures highlight that thousands of people are affected every year. Keep warning signs in mind and when suspicions are aroused double check. The FCA register is a good place to start, however, as the case of London Finance and Capital demonstrates, it’s important to check what a firm is regulated by the FCA for.
  • Check all products and opportunities carefully: Adverts and sale pitches naturally focus on the positive. As a result, it’s important to carefully look through the finer details. That may mean reading the small print and asking some well-chosen questions. A genuine firm will be happy to speak with you and offer the information requested; they’ll understand it’s an important decision.
  • Assess your overall financial wellbeing and plan: High returns in return for a higher level of risk might sound worthwhile, but what if that money was earmarked for something just two years away? Volatility could have a serious impact. All your financial decisions should be made with your wider plan in mind and take your current financial wellbeing into account.
  • Speak to your financial planner: Your financial planner has the experience and knowledge to not only offer advice about the financial products that are right for you but also flag up when you could be making a mistake.

One of the key things to keep in mind when FOMO is affecting your decisions is: If it sounds too good to be true, it probably is. Ask yourself why thousands of others, including financial professionals, aren’t jumping on the opportunity if the claims are to be believed. Often, claims will be misleading, you’ve missed an important drawback, or it’s simply a scam.

If you’re making a financial decision, but have concerns, we’re here to offer you advice and insight.