When browsing through Instagram it is completely evident that there is zero control over what is posted, portrayed and promoted for potential traders.
At first view, it’s almost as bad as the old school King of Wherever offering you a percentage of his fortune to help transfer his wealth to the UK.
But actually it’s much worse than that.
Every single post looks like a get rich quick scam with supercars, champaign and “lifestyle” traders seemingly making millions from trading the markets. Not to mention the “forex education” providers who claim they can cover the cost of a weekend away in the sun with a single trade put on from a private jet.
Financial services is one of the most highly regulated industries in the world and financial promotions are even more so. They need to carry a plethora of risk warnings, disclaimers and caveats before they are even put to the compliance and legal teams for consideration.
It’s obvious that Peter Andre and Richard Branson didn’t really make their money from trading in binary options (as some fake articles promoted on social media suggest). Now it’s just kids driving gold Bentleys and quaffing champaign on a private jet.
The main problem though, is that anyone who understands the risks of trading would be supposedly clever enough to know that all these Instagram posts are a complete scam. But, those that don’t (and aren’t) are going to get drawn in and scammed.
The point here is that social media is completely unregulated and if the government can’t stop terrorist propaganda they won’t have much luck trying to ban some spiv from claiming to be a millionaire trader.
It’s up to the brokers to embrace the new leverage caps to only offer top tier leverage to clients that can demonstrate the relevant understanding of risk. Whilst either not allowing inexperienced customers to have an account (although this is probably a little unfair) or at least reducing the leverage available to them initially.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.