Should you trust money advice from finfluencers on TikTok and YouTube?

The popularity of fin influencers, also known as financial influencers, has exploded in recent years, especially among newer investors.

Savers and investors, especially those in their late teens, twenties and early thirties, are increasingly turning to finfluencers on social media channels such as Twitter, Instagram and TikTok to help with their financial decision making.

Meanwhile, there is also a major shift in the financial services landscape to social media, in an effort to target the younger or more entry-level investor group.

But anyone with a social media account can profile themselves as a finfluencer, so how do you separate the wheat from the chaff and how do you know what to trust?

What is a fin influencer?

Finfluencers are influencers who create content about financial topics on social media channels such as TikTok, Instagram, Twitter and YouTube.

There has been a surge in influencer content since the pandemic and some finfluencers have amassed millions of followers.

What kind of content do they create?

Some influencers share daily budget tips in a short video, while others share their own financial journeys and experiences.

A lot of useful content is being created, ranging from budget tips to sharing financial stories.

However, questionable advice is also being dished out and some financiers claim that certain risky investments are a sure way to get rich quick, such as cryptocurrency.

Useful for information but not for advice

The general consensus of the experts is that there is a fine line between finfluencers who provide information, which they are good at, and finfluencers who offer advice, which you should be careful about.

Anna Stoughton, commercial business manager at Charles Stanley, says that while using social media ‘can be good for information, it’s not so good for advice – as everyone’s individual circumstances will differ’.

“It’s important to remember that finfluencers aren’t necessarily qualified financial advisors or qualified experts, their posts are general guidelines that tend to target the most views,” she adds.

The experts also agree that anything that helps people, especially younger people, get interested and involved in their finances is a good thing.

Tom Selby, head of retirement policy at AJ Bell comments: “If financiers are able to engage their followers in explaining important concepts such as compound interest and the importance of saving for the future, it can enable people to make more informed financial decisions. decisions.’

However, viewers should be wary of being fooled into anything and remember that there are not the same checks and balances that exist in mainstream publishers and newspapers or in the content of regulated financial firms, such as DIY investment platforms.

Brian Byrnes, head of personal finance at app Moneybox warns: ‘It must be said that some of these personalities are not always what they want to be, and social media can sometimes be used by a strange influencer with an ulterior motive. .’

This is where the lines between what is good, healthy and useful can blur with riskier get-rich-quick schemes, he continues.

Tom Selby agrees that “there is clearly a significant risk that financiers are spreading misinformation or encouraging risky behavior, such as day trading individual stocks, without properly explaining these risks.”

But it’s not just finfluencers who use TikTok as a platform to share their investing experiences.

Asset manager M&G’s app called &me now has a TikTok, where they post short videos about their stocks and shares of Isas, Junior Isas and Sipps, and AJ Bell’s Dodl app also has a TikTok. Both are regulated companies and therefore their content will have been carefully vetted.

Can I trust them?

When it comes to trusting finfluencers for advice, Brian Brynes recommends doing some due diligence by asking:

iis the finfluencer regulated?

You can check the FCA Registry to see if an account owner has permission and qualifications to recommend investments.

Does what they offer seem realistic or is it ‘too good to be true’?

If they suggest that you can double your money in the short term or offer high returns ‘risk-free’, it could be a scam.

Do they provide information and education or do they ask you for money?

There are great accounts that provide excellent infographics and educational materials. These are great places to learn and with this information you can save, invest and manage your pensions on licensed and regulated platforms.

In general, investing or transferring money through social media because of what you’ve seen from a finfluencer is never a good idea. Should it turn out to be a scam, you have very limited recourse to get your money back.

What about the regulation?

The Financial Conduct Authority does not regulate finfluencers as an entity. However, financial promotions are regulated by the FCA, just like financial advice.

The FCA states that unauthorized persons should give people personal advice on the merits of certain investments as this is likely to be subject to regulation and could lead to action against them.

Likewise, regulated individuals or companies should be careful about what they promote on social media. In one case, the FCA found that a director of a regulated company used his personal profile to promote the advice of unauthorized traders and other financial products.

As a result, they were blocked by the FCA from using their personal social media to promote financial services and the company had to stop all promotions for financial services.

The FCA recently partnered with the Advertising Standards Authority to educate financiers about the risks of promoting financial products.

Sarah Pritchard, the FCA’s executive director of markets, said the FCA has seen more cases of influencers touting products they shouldn’t be.

“We want to work with influencers so they are on the right side of the law, as this will also help protect people from scams or investments that are too risky,” she said.