Social media is a powerful platform that reaches across many generations, ages, and genders. Almost everyone you know will be present on some type of social media platform. The digital landscape of social media is ever evolving and constantly changing and adapting, which means it can be hard to keep up with sometimes.
We are all aware of influencers and the role they play in the social media world, but are you aware of the rise of a specific kind of influencer? The new breed of influencer has taken over social media platforms, and they have been named 'finfluencers' (financial influencers). Many finfluencers are offering financial insights and guidance to their growing audiences on social media. However, there's a growing concern about the legitimacy of their advice. Are all financial influencers truly credible, or do some pose risks to their followers?
The Rise of the Finfluencer
Finance + influencer = finfluencers. Simply put, are those who offer advice, insights, and education on various financial topics using their social media platforms. The topics they cover can include tips on saving, investing, getting into cryptocurrency, and sometimes even get-rich-quick schemes.
These finfluencers utilise social media platforms like TikTok, Instagram, YouTube, and X to share their knowledge. They can connect with a wide audience on these platforms, typically made up of those in the younger generations. Studies have shown that 25% of 18-24 year olds will use social media to gain financial advice and guidance, while 20% are making investing decisions based on what they are recommended via social media.
The advice and information offered by finfluencers is typically quick and easy to digest, as this is how younger generations respond and process content best. Their content often features short-form videos where they casually chat to the camera, offering education while sharing personal anecdotes. This creates trust and feels like a friend offering you advice. They also use aesthetically pleasing static content such as infographics and carousel tiles. While these forms of content can be engaging, they often don’t provide all the information needed to make fully informed decisions.
Issues with Finfluencers
Many finfluencers have claimed that audiences are interested in and are following their advice and tips on financial topics. However, experts are cautious, suggesting that these finfluencers may be leading their audiences in the wrong direction and, in some cases, taking advantage of them.
A huge issue with finfluencers is that anyone with a device and access to the internet can become a finfluencer, you don’t need any sort of qualification or formal education. Connor Campbell a business finance expert from NerdWallet UK says that "Some of these influencers are just regular people with no background in finance." There is a great danger of misinformation being spread through those who aren’t educated or even qualified to offer financial advice to others.
Within the financial space on social media platforms, various trends are emerging, ranging from cryptocurrencies, investments, cash stacking, to buy now pay later services. However, it is becoming increasingly problematic as these trends involve real money and entail real risks.
The influence of social media often causes individuals to rush and make uninformed decisions. This stems from a fear of missing out on opportunities that others are participating in, which can impact financial decision-making.
Finfluencers, much like influencers, are earning income through the promotion of financial products. They do this via sponsored posts and referral fees. This has recently become a topic of discussion for the Financial Conduct Authority (FCA), as the lack of regulations and transparency within finfluencer content has raised concerns.
The FCA is concerned that some finfluencers are failing to disclose and label their content as advertisements. For example, failing to disclose financial incentives they might be receiving for their advice may lead them to promote products they don’t believe in, use themselves, or even fully understand. This lack of transparency leads to dishonesty, as it misleads audiences who may not realise the commercial intent behind the content. Consequently, they are unable to make an informed decision about whether to follow the advice of someone who is being paid to promote the service or product.
How to Identify Legitimate Financial Advice
With the finfluencer market being so saturated, how can you avoid untrustworthy and dishonest advice from fake finfluencers?
Don’t Make Assumptions
Popularity doesn’t equate to financial qualification. Just because someone has thousands of followers and views, it doesn’t mean that their advice is trustworthy or accurate in the slightest. It's worth conducting your own research to find out whether they are qualified to give financial advice. However, it's always safest to assume that someone isn’t an expert until proven otherwise.
Be Risk Aware
The number of cyber scams have excelled over the last few years, with “get rich quick” schemes being one of the most prevalent cases, with victims being promised high returns within hours of making their investments. According to Unbiased.co.uk between 2021 to 2022 investment fraud rose nearly 50% to £890 million, this shows that these scams are prevalent and are on the rise. The best thing to be is risk and scam aware when making any financial decision, think twice and then a third time.
Seek Second Opinions
To be extra safe, look to seek second opinions from multiple sources, including proven financial advisors who are licensed, reputable financial websites and official educational resources. Don’t rely on one opinion without conducting any follow-up research.
Advertisements
Keep in mind that these finfluencers are often being paid to promote services, trends, products etc. They often don’t know anything about what they are promoting, their only focus is on making an income themselves and they don’t care what the repercussions are for their audiences. Also be aware that some of these finfluencers aren’t disclosing when they are posting sponsored content, take extra caution with posts that promise things too good to be true like get rich fast schemes.
It's essential for audiences to be cautious and critical when consuming financial advice from finfluencers on social media. By evaluating the situations, being risk aware and asking for others opinions to avoid falling victim to misinformation or scams.