It’s a pretty common practice nowadays, when searching for information, to turn to the internet for answers. Thrown into the mix of every internet search is a slurry of social media platforms, each coming with their own influencers.
There was a huge rise in the number of financial influencers during the 2020 lockdown. During this time people were stuck at home and worried about their finances. They turned to YouTube and other social media sources to learn more about how they could be financially stable during a very unstable time. Now, being called “finfluencers,” these social media influencers offer advice on investments, retirement, and many other aspects of personal finance.
It's becoming more and more common for influencers to take up the financial position, offering advice on the best ways to save money, plan your retirement, and which stocks to invest in. On the surface, the added voices of information and help seem like a good thing, many of them are truly giving beneficial advice. However, this is becoming a problematic situation.
One reason finfluencers are such a controversial topic is because the financial industry is one that is highly regulated for the safety and protection of clients and their money and interests. Online, it’s a different story. There are influencers all over the world and few global precedents to regulate finfluencers. Many popular finfluencers are not officially registered advisors, which has led to illicit practices.
On December 14, 2022 the Securities and Exchange Commission announced charges against eight people in a $100 million securities fraud in which the accused used social media platforms to manipulate exchange-traded stocks in a “pump and dump” scheme.
The North American Securities Administrators Association (NASAA) released an advisory statement August of 2022 stating, “Investors should keep in mind that finfluencers are not subject to the same regulations as licensed financial professionals and may have undisclosed conflicts of interest. Before you consider investing or acting on advice from a social media personality, make sure you understand all the ins and outs of the investment including all potential risks.”
This is not to say that all finfluencers are out to scam and steal your money. Some are licensed financial advisors providing valuable information using social media to better connect with clients and a greater population. But it is essential to remember that just because someone has a large following, multiple likes or shares, or even a verified check mark does not make them a properly licensed professional. They may not have the level of knowledge or ethical standards as a licensed financial advisor.
The final thing to remember is that finfluencers are speaking to a broad range of followers, they are not catering to your individual needs. They don’t know you personally nor have a relationship with you. To them, you’re just a follower. Finances are personal. If you want the best results, they should be handled in a way that reflects your own personal interests.
Photo by: Adem AY