Financial influencers or ‘finfluencers’ are everywhere on social media. Just open up your preferred app of choice and you will soon find a well-edited video (usually shot in some far-off luxury location) of someone telling you how they make money.
But this is far from credible. It is well known that scammers use this technique to get people to invest with them, while even those that do what they propose – give you tips and trades to make – are rarely offering sound financial advice.
Although it may seem like common sense to not take advice on your finances from social media influencers, it is becoming a growing concern for the City watchdog: the Financial Conduct Authority (FCA) this week took action against these posts.
It is by no means an easy feat however. There has been a surge in recent years of people promoting speculative investments – particularly cryptocurrencies. And people are listening.
According to data from the FCA’s Financial Lives Survey, one in six investors use social media to research investment ideas or get updates on their assets – a figure that rises to a shocking 50% of people aged 18 to 24.
In its latest guidance, there were no new rules or penalties imposed by the FCA for people who post misleading content on social media.
While regulated individuals have strict rules to follow – particularly pertaining to financial advice – online it is a different story. But that does not mean there are no repercussions for those that try it.
Laura Suter, director of personal finance at AJ Bell, noted: “The FCA has warnings for finfluencers, who are often dishing out advice on social media even if they don’t have a commercial arrangement with a finance company. The regulator is reminding these finfluencers that they could face up to two years in prison and an unlimited fine if they break the rules.”
Of course, not all finance-related content on social media is bad. There is a lot of good content from credible sources out there that can help people get to grips with their finances and start making smarter choices.
But it is a real Wild West online. If in doubt, remember: investing should be a long-term game of getting rich slowly; rather than taking big bets on speculative investments. Anyone with a camera can purport to be a financial expert, with no evidence that they know what they are doing.
As a general rule I would never trust anything finance-related I see on social media, particularly from traders or people not affiliated with an FCA-regulated company.
I’ll stick to the boring – investing in my stocks and shares ISA and savings into my current account – over taking advice from someone online. It may not make me rich in a hurry, but it will certainly lower the risk of losing it all in an instant.