eToro is being sued by ASIC for marketing one of their investment products, called contract for differences.
👉 Background: eToro is a social trading and brokerage platform. Think of it like social media and trading stock combined. It has more than 32 million usersin over 100 countries, including Australia, where it launched back in 2019.
👉 What happened: Now, eToro is being sued by ASIC for marketing one of their investment products, called contract for differences (CFD's), at an inexperienced audience. CFD investors can bet on which way the price of a stock moves, and if they win, they win big — if they lose, it's painful.
👉 What else: In fact, a judge previously called CFD's a "financial heroin hit". According to eToro, about 77% of investors lose money when they trade CFDs... And those odds are worse than playing black jack.
💡In financial services, marketing can't be just about reaching as many people as possible. It's also about identifying who should and shouldn't be targeted.
💡 ASIC reckons that eToro's target market for CFD's is too broad, and includes investors that don't understand the risk of this investment.
💡Ultimately, eToro has an obligation to make sure their investors fully understand what risks they're taking on before they put their money on the line.
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