Social media money tips can blow you away

THE social media Wild West has gone all guns blazing into the lucrative financial services sector.

Now the fear is that cowboy influencers are in danger of running amok.

The Financial Conduct Authority (FCA) has updated its guidelines but the question needs to be asked – how effective is this likely to be given these are individuals and entities who appear to have respect for nothing and no one?

Most worrying, the target audience is the young and impressionable who don’t always understand what they are buying, seduced by people who don’t always understand what they are selling.

Big bucks can be made. The global influencer market has risen from

$1.7 billion in 2016 to $21.1 billion in 2023, according to Statista.

The message needs to get across that influencers, otherwise known as ‘finfluencers’, can be prone to sharp practice. Not all, but it is widespread. Indeed, some are out and out scammers.

The FCA states: “In recent years we have observed the rise of finfluencers with 62% of 18- to

29- year-olds following social media influencers and 74% saying they trust their advice. Often these influencers have little knowledge of what they’re promoting. This lack of expertise is reflected in the large number of promotions that are either illegal or non-compliant.

“The influencer market is varied; some influencers have direct relationships with firms and others promote on their own initiative.

“First, there are the archetypal celebrity influencers who are not associated with financial services but have large follower groups.

These influencers are not financial experts but may be compensated for using their digital presence to promote companies that have a business interest in persuading people to make certain financial decisions.

“Second, there are financial influencers who may not be authorised by the FCA to provide financial advice yet share their opinions and recommendations on digital platforms. Consumers exhibit high levels of trust in finfluencers, but their advice can often be misleading.

“Third, there are forums and discussion groups on financial topics that function as spaces in which individuals exchange information and share knowledge. These can be both public (such as Reddit) or private (such as Telegram). Sometimes these groups are used by participants to encourage others to engage in personal chats outside the platform where they sell financial advice or financial products.”

Web site Unbiased claims many finfluencers “may do more harm than good”, with cryptocurrency often a favourite.

It states: “Finfluencers usually offer advice in quick, easy-to-digest videos, which can be engaging – but may not provide all the information you need to make a fully informed decision. Some financial promotions could even be considered criminal offences.”

This Is Money quotes financial influencers on social media sites such as TikTok as being second only in importance to speaking to a close family member for under-25s.

But, cautions Standard Life, is what they’re saying too good to be true?

It notes: “Just how trusting should people really be of unqualified strangers who in some cases are being paid to promote specific financial products?

“The fact is, anyone can set themselves up to be a finfluencer on social media. You don’t need to be regulated, or have any financial knowledge, experience, or skills. This means a finfluencer could say just about anything they want.”

So beware get rich quick schemes. Don’t assume an influencer is an expert, be scam aware, do your own research and don’t take everything at face value.

Unbiased adds: “One of the best ways to avoid bad advice that could cost you significant sums of money is to pay for it.”

Safer to consult a regulated financial planner.