The rise (and Possibly fall) of “Finfluencers”
36% of under-25s turn to “finfluencers” – financial influencers – for help with managing their wealth.
BBC News, Kevin Peachey, 16th May 2024
In June 2024, nine reality TV show stars from programmes such as Love Island and The Only Way is Essex went to court, accused of promoting an unauthorised investment scheme on social media. Eight of the nine pleaded not guilty, and only time will tell what the verdict will be when they’re tried in 2027.
Whatever the outcome, the court case raises an important question about where we take financial advice from and whether we can trust everything we see online.
This is an issue that the Financial Conduct Authority (FCA) are especially interested in right now as more people look to “finfluencers” – financial influencers – for help managing their wealth.
In fact, the FCA recently published guidelines about promoting financial products and advice on social media to protect consumers. This is because, in many cases, the information finfluencers share online is misguided, incorrect, or outright fraudulent. Since introducing its guidelines, the FCA has brought charges against finfluencers, including the reality TV stars who recently appeared in court.
Luckily, stricter guidelines and high-profile court cases involving social media personalities could mean that the world of online financial advice is changing. However, that doesn’t mean social media is a reliable place to find investment tips or learn about retirement planning.
A third of Gen Z look to finfluencers for financial advice
The advent of the internet means that we have a whole world of information at our fingertips. Sometimes, this is a huge benefit, but it can also be dangerous as it gets more difficult to separate useful, accurate resources from incorrect or deliberately misleading information.
Despite this, many people still head online to find information about their finances. According to This is Money, 36% of under-25s said they relied on finfluencers as their main source of financial information.
It’s not just younger people who search online for help with their finances either, as 52% of all UK adults said they would take savings tips from social media. In comparison, less than a tenth of people under 25 said they would seek help from a financial adviser1.
So, finfluencers are fast becoming one of the main sources of financial support for consumers. Some of the content they produce is based around savings challenges such as the “no spend challenge”, encouraging individuals to have one day a week when they don’t spend at all. Or, there’s also the “penny saving challenge”, which involves increasing the amount you save each day by 1p for one year, leaving you with a pot of more than £600.
This content may encourage you to consider budgeting and saving, and help you develop positive financial habits. However, when you look to social media for investment tips or advice about retirement planning, you could be more likely to find poor information that works against your financial plan.
74% of people who followed financial guidance from social media lost money or experienced “undesirable outcomes”
One of the main problems with seeking advice from finfluencers is that many of them have no training in financial services.
For example, a recent study by Capital One found that 80% of financial content on YouTube comes from influencers with no qualifications. Additionally, finfluencers don’t know your personal situation or long-term goals, and the guidance they give isn’t specific to you. So, their advice might not be suitable for your financial plan.
Ultimately, this means making decisions based on information you see online could make it harder to reach your goals, and in some cases, might harm your finances.
Statistics support this as Capital One found that 74% of people who followed financial guidance from social media lost money or experienced “undesirable outcomes”.
As a result, it could be risky to take investment tips from social media influencers because, even if they have the best intentions, they don’t have the knowledge and expertise to give reliable guidance. And, in some cases, finfluencers might even be sharing deliberately misleading or fraudulent content.
Almost £75 million is lost to fraud on social media every year
Fraudsters are constantly adapting their tactics and finding new ways to reach unsuspecting members of the public. Social media is the biggest communication tool in history, so it’s no surprise that criminals take advantage of it and use platforms to push investment scams.
Unfortunately, it can be hard to tell the difference between a finfluencer giving potentially bad advice, and a scammer promoting a deliberately fraudulent investment.
That’s why Which? reports that, in 2022, users lost £74.7 million to fraud on social media platforms, with victims losing more than £20,000 each on average.
Criminals also use increasingly advanced technology such as “deepfakes” to push their scams. These digitally manipulated videos can make it appear that a well-known figure is saying whatever the scammers want them to. For example, a deepfake of Martin Lewis recently encouraged many social media users to invest in a fraudulent scheme.
So, even if you’re cautious, it’s easy to fall victim to scams on social media.
Working with a professional could protect you from mistakes and help you reach your goals
If you rely on online financial influencers for guidance, you could make choices that don't fit your financial goals. In the worst case, you might invest your money in scams and suffer significant losses.
When you work with a professional financial planner, we'll take your specific circumstances and aspirations into account, creating a personalised financial plan.
One of the main advantages of working with a professional is our expertise and qualifications, which ensure you receive reliable information.
We also conduct thorough research on any investments to safeguard you from scams. Crucially, professional financial advice is regulated, guaranteeing that the information we provide is accurate and acts in your best interests.
As a result, you're more likely to create your own financial freedom and enjoy your desired lifestyle both now and in retirement.
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This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Benchmark Financial Planning is not responsible for the accuracy of the information contained within linked sites.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Sources: https://www.thisismoney.co.uk/money/bills/article-13227675/A-Gen-Z-look-TikTok-finfluencers-financial-advice.html , https://www.capitalone.co.uk/blog/social-media-finance-report, https://www.which.co.uk/news/article/75m-a-year-is-lost-to-investment-fraud-on-social-media-ag8ul8d2IZso