The internet can be a great resource for anyone looking to expand their knowledge on any number of topics; investing being no exception. However, what if that research was being filtered and altered to persuade investors to make decisions that were not in their best interest? According to new research from the Ontario Securities Commission (OSC), retail investors face various hidden risks from ‘digital engagement’ practices.
The “dark” practices are commonly found in mobile trading apps that use gamification, marketing prompts, and social tactics. These digital engagement practices have the potential to negatively impact an investor’s welfare.
Investors are easily swayed by behavioral nudges online. The research has shown that these “dark nudges” actively push investors in the wrong direction. Some investment firms are using a range of different online tactics to reduce investors’ ability to think carefully about their decisions; persuading them to facilitate activity that generates revenue for their firm, not the investor. These tactics also create barriers that discourage clients from closing their accounts.
“Specifically, the regulator’s concerns with these tactics include their use to hide fees, mask the cost of investing, obtain personal information without consent and prevent clients from cashing out their funds.”- OSC shines a light on “dark” arts of online investing written by James Langton.
The report states that regulators around the world are stepping up their efforts to better understand and protect investors from these potentially harmful online practices.
Technology continues to advance at a rapid pace; if you research and invest online, be aware of subliminal messages you may be receiving, they may be pointing you in a direction you don’t want to go.
As always, you should speak with a financial expert before making any important financial decision.
Have a great weekend,
Tracey & Paige
Photo by Becca Tapert on Unsplash