16 December 2024 |
4 minutes
The pros and cons of financial influencers
Financial influencers have taken the social media world by storm – but should you trust their recommendations when it comes to your hard-earned cash?
If you’ve ever found yourself scrolling through social media and stumbling upon an influencer giving financial tips, you’re not alone. On TikTok, 'FinTok' is a growing trend, with hashtags like #stocktok and #personalfinance getting millions of views.
'Finfluencers', as they’re known, upload videos covering everything from budgeting and ISAs to taxes and debt. These short videos raise awareness of how to manage your personal finances, but it’s wise to take finfluencer content at face value.
When it comes to your finances, it’s important to do your own research and seek professional advice. Read the rest of this blog to find out why.
Benefits of financial influencer content
On the face of it, it can seem like there’s a lot to be gained from viewing finfluencer content. Some benefits include:
- It’s relatable
- It’s accessible
- It’s inspiring
- It’s interactive
Finfluencers have a knack for making complex financial concepts seem easy to understand. They use catchy videos, memes and real-life examples to explain everything from budgeting to investing.
Traditional financial advice typically costs money and can sometimes feel intimidating. Finfluencers offer free information that’s just a click away. This makes financial education accessible to everyone, regardless of their background or income.
Seeing someone your age managing their finances can be motivating. Finfluencers often share their personal stories of financial success, which might encourage you to take control of your own money journey.
Many finfluencers create a sense of community among their followers. You can join discussions, ask questions and share your own experiences. This might feel like a support group for your financial goals.
Risks of financial influencer content
The drawbacks of finfluencer content probably outweigh the benefits, so don’t take everything you see as official advice. Some risks include:
- Lack of credentials
- Lack of regulation
- Oversimplification
- Misinformation and scams
- Hidden agendas
- A lack of authority
Not all finfluencers have a formal financial education or certifications. Some might be sharing tips based on their own experiences, which are unlikely to apply to everyone. Always do your own research and verify the information they are sharing.
Most financial influencers are not regulated by the Financial Conduct Authority (FCA) and may not entirely understand what they’re promoting. Because social media is vast and fast-moving it’s virtually impossible to police, so misinformation can be visible before moderators have reviewed and taken it down. By the time this happens, it could be too late for those who may have acted on it.
On 22nd October 2024, the FCA made it clear that it’s tightening the reins on social media personalities who might be promoting or giving advice on financial products and investments without proper approval. As a result, the FCA is actively investigating 20 of these finfluencers, all of whom are under caution.
Personal finance can be complex, and short social media posts might oversimplify important details. It’s crucial to dig deeper and seek comprehensive information before making any major financial decisions. In addition, many finfluencers aim their content at the American market, which has different rules and regulations compared to the UK.
While there’s a lot of helpful information online, there are also many misleading recommendations that could hurt your pockets or leave you vulnerable to scams. Some influencers might promote risky investments or get-rich-quick schemes that could lead to financial losses with no way of getting your money back.
Finfluencers often make money through sponsored posts and affiliate marketing. This means they might promote products or services that aren’t necessarily in your best interest. Be wary of tips that seem like a hard sell.
Is the online finfluencer well-known or established? Are they regulated by the FCA or just reposting content from their bedroom? Do some research into the person, their background and their motives. If they aren’t regulated then you probably won’t be covered by any form of protection, such as the Financial Ombudsman Service, if you go along with a recommendation and lose out financially.
It isn’t for everyone
If you’re in a profession such as medicine or dentistry, your financial needs and goals might look different to others because of your working and earning arrangements.
For example, if you’re trying to work out the intricacies of the NHS Pension Scheme, TikTok or other online resources can point you in the right direction, but are unlikely to cover all the information you need – and certainly not all the information that fits your unique circumstances.
It’s essential to approach financial content on social media with a critical eye. Always cross-check information, seek advice from multiple sources and consider speaking to a qualified financial adviser for more personalised advice. Your financial future is too important to leave to chance.