Social media has made it relatively easy for anyone to present themselves as what they are not. With platforms like TikTok, Instagram, and Twitter, there is a growing wave of creators dishing out tips that might not be practicable in the real world. The delicacy of finance as a niche makes it an even bigger problem to trust such advice, and we are beginning to see more people lose money due to this pandemic. Should you take financial advice from a finfluencer online? Here’s an article on what experts advise on this matter.
What Is a Finfluencer?
The term finfluencer was coined from the two words financial and influencer, and these individuals create content and provide information or financial advice for their online audience. They can also influence people’s financial decision-making through recommendations, promotions, or personal experiences. The influencer community has seen massive growth since the pandemic, and presently, there are around 50 million of them across all social media platforms, including TikTok, Instagram, and YouTube.
Ideally, investors, forex traders, and finance-savvy individuals would prefer advice from a legal and knowledgeable financial adviser or forex broker. Still, with the growing online community, the younger generations find advice from finfluencers easily accessible and are often more inclined to go with it. The barrier to entering this field is relatively low, and anyone with a camera and aesthetic setup could decide to become a social media influencer today. This is why people question whether financial advice from such individuals should be trusted.
Advice or Information? What Are Finfluencers Useful For?
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One of the first things to remember with influencers is that they are not professional financiers or qualified experts. Therefore, their words should be viewed discerningly, not accepted as solid advice at face value. The recent crypto wave is a practical lesson in this context, as we saw influencers, public figures, and celebrities like Kim Kardashian, Elon Musk, Matt Damon, and many more endorse crypto tokens and NFTs. Most of these celebrities took the backlash when people lost loads of their investments to this wave.
Another critical point is that most of these finfluencers sometimes get paid to promote or endorse these products or services, regardless of whether or not they are profitable to the users and audience. The line between what is profitable to them and their audience gets blurred. Predominantly, the audiences suffer the most from it. Although this isn’t to say that all influencers work this way, it’s important to emphasize that viewers need to be more wary of what they take as helpful information and financial advice.
What To Look Out for Before Trusting a Finfluencer
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Background
This includes checking if the finfluencer has a background in finance or is educated enough in the field to be an expert adviser. As much as the space is highly unregulated, some finfluencers have a background in finance and know their onions. Do a background check, and be sure these individuals have decent experience in finance.
Regulation
Regulation is an issue of concern in the space, and since many people are posing to be experts, one can never be too careful. This is where the Securities and Exchange Commission (SEC) comes in. The SEC is constantly looking for fraudulent social media influencers that tag themselves as traders or experts in finance. There are other finance bodies across the globe, like the FCA, SEBI, AFS, and more, creating laws and regulations against unlicensed finance advisers. Be on the lookout for news and updates from the bodies to know which red flags to evade in dealing with financial influencers.
Unrealistic Offerings
This is one thing we see many people fall for on social media. Unrealistic offerings that are too good to be true, and content like how to double or triple your money in X number of days. If the offerings seem too good to be true, it will likely be a scam. Choose safer investments endorsed by credible financial institutions to avoid falling for cheap scams. Lastly, avoid influencers that request you send money to them via social media. Before making any investment commitments, do your independent research outside of those given by any influencer.
Social media is an excellent source of information. If properly utilized, it could set you some steps further in your journey towards success. However, it is paramount to separate the good from the harmful; the same goes for dealing with finfluencers. Watch out for red flags, like FOMO content, free offers, get-rich-quick schemes, and any dubious advice. The internet could be a place to build your financial knowledge and wealth, but it could quickly be the opposite.
