From TikTok to Truth: The risks of taking financial advice from social media

Finfluencers have seen a meteoric rise in popularity, leveraging social media platforms to provide ‘advice’ on budgeting, saving, investing, and more. They create content aimed at the people who spend a substantial amount of time online, and they’re getting cut through, with three quarters of 18-34-year-olds saying they’d viewed financial posts from social media personalities.

Finfluencers cover a broad spectrum of financial topics, from the less complex areas of budgeting, and financial products like ISAs and mortgages, to the more extreme, high-risk, complex investments, like foreign exchange trading and cryptocurrencies.

They earn money through views, affiliate links, and sponsorships, but their advice lacks the regulation and oversight offered by professional financial advisers. A regulated financial adviser must follow strict rules when it comes to promoting their services
The allure is clear. They’re often a similar demographic to the audience they’re targeting – provide relatable, engaging content that speaks directly to their audience’s financial aspirations and challenges. But promises to turn £100 into £10,000 with a “simple trick” are very appealing – but also too good to be true!

Perhaps the go-to finfluencer for adults is Martin Lewis, founder of moneysavingexpert.com and financial campaigner. For younger generations, though, the TikTok hashtag #fintok has had half a billion viewers, showing the extraordinary reach and power of these channels.

Finfluencers provide a sense of community. They’re accessible and entertaining, offering a far more engaging alternative to a ‘traditional’ financial adviser. Their followers see themselves reflected – and understood – and this is something that’s impacted their financial behaviour. According to the PIMFA research findings 26% of people have considered making financial decisions based on social media advice, with this number rising to 65% among those who actively follow finfluencers.

However, the unregulated nature of finfluencer advice can pose a significant risk, especially to people who don’t have the money to lose. Many influencers are unqualified, and their ‘advice’ can be misleading or downright dangerous. Earlier this year the FCA brought charges against nine individuals alleged to have been promoting an unauthorised, high-risk investment product on Instagram to their 4.5 million followers. The youngest of those charged is 26 and the oldest, 38. The product, according to the FCA, is likely to see 80% of those investing in it lose money.

The question for many people is what to believe and what not to believe. It’s crucial to approach finfluencer content with a critical eye. Before you act on any advice you’ve found online, take the time to do your own research before investing your hard-earned cash:

• Check credentials: Verify the influencer’s background and qualifications. Are they authorised and regulated by the Financial Conduct Authority, the body that regulates financial advice?
• Cross-reference information: Compare what you’re hearing with information from reputable sources like government websites and established financial firms
• Avoid impulsive decisions: Investing your money comes with risk. Investments can go down as well as up and you may not get back what you put in. Take your time and question what you’re hearing.

While financial advice from social media can provide general tips, it can’t replace the personalised guidance of a regulated financial adviser. Personal financial advice considers individual factors like age, risk tolerance, family circumstances, and tax status—things that can make what’s right for one person totally wrong for another.

For major financial decisions, it’s crucial to consult with a regulated financial adviser. They’ll get to know you and your unique situation, creating a comprehensive financial plan tailored to your goals. It’s their job to keep an eye on your plan over the long term, ensuring it stays aligned with your objectives. And as your life changes, they’ll work with you to adjust your plan accordingly.

Amber River’s independent financial planners offer personalised financial planning and advice, helping people make informed decisions based on their unique circumstances and goals. Unlike unregulated finfluencers, Amber River’s advisers are bound by strict regulatory standards, ensuring the advice provided will always be in their client’s best interests.