Should you trust money advice from finfluencers on TikTok and YouTube?

There has been a huge increase in the popularity of finfluencers, aka financial influencers, over the last few years, especially among newer investors.

Savers and investors, especially those in their late teens, twenties and early thirties, are increasingly turning to finfluencers on social media channels like Twitter, Instagram and TikTok to help with their financial decision-making.

Meanwhile, there has also been a large shift in the landscape within the financial services sector towards social media, in an attempt to target the younger or more novice investor group.

But anyone with a social media account can set themselves up as a finfluencer, so how do you sort the wheat from the chaff and how do you know what to trust?

What is a finfluencer? 

Finfluencers are influencers who make content on financial topics on social media channels such as TikTok, Instagram, Twitter and YouTube. 

There has been a surge in influencer content since the pandemic and some finfluencers have amassed millions of followers.

What kind of content are they making?

Some influencers share everyday budgeting tips in a short video format while others talk about their own financial journeys and experiences. 

There is lots of useful content being made, ranging from budgeting tips to the sharing of financial stories. 

However, there is also some dubious advice being dished out and some finfluencers claim that certain high-risk investments are a sure-fire way to ‘get rich quick’, such as cryptocurrency. 

Useful for information but not for advice

The general consensus from the experts is that there is a fine line between finfluencers giving information, which they can do well and finfluencers giving advice, which you should be cautious of. 

Anna Stoughton, commercial business manager at Charles Stanley says while the use of social media can be ‘good for information, it is not so good for advice – as everyone’s individual circumstances will differ’. 

‘It is important to remember that finfluencers are not necessarily qualified financial advisers or qualified experts, their posts are generic guidance often aiming for the most views’, she adds. 

The experts also agree that anything that helps to get people, especially younger people interested in and engaged with their finances is a good thing.

Tom Selby, head of retirement policy at AJ Bell comments: ‘If finfluencers are able to explain to their followers key concepts like compounding and the importance of saving for the future in an engaging way, that could in turn enable people to make better informed financial decisions.’

However, viewers need to be wary about taking everything at face value and remember there are not the same checks and balances as there are at mainstream publishers and newspapers or in the content put out by regulated financial firms, such as DIY investing platforms.

Brian Byrnes, head of personal finance at app Moneybox warns: ‘It should be said that some of these personalities aren’t always what they’re cracked up to be, and social media can sometimes be used by the odd influencer with an ulterior motive.’

This is where the lines between what is good, sound and helpful best practice can become blurred with riskier ‘get rich quick’ schemes, he continues.

Tom Selby agrees that ‘there is clearly a significant risk of finfluencers spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks, without properly explaining those risks’.

But it’s not just finfluencers who use TikTok as a platform to share their experiences with investing though. 

The app of wealth manager M&G called &me now has a TikTok, where they post short videos about their stocks and shares Isas, Junior Isas and Sipps and AJ Bell’s app Dodl also has a TikTok. Both of these are regulated firms and so their content will have been vetted carefully.

Can I trust them?

When it comes to trusting finfluencers for advice, Brian Brynes recommends carrying out some due diligence by asking the following:

Is the finfluencer regulated?

You can check the FCA register to see whether the owner of an account has permission and the qualifications to be recommending investments.

Does what they are offering seem realistic or is it ‘too good to be true’?

If they are suggesting you can double your money in the short term or offer high returns ‘risk-free’ then it may be a scam.

Are they providing information and education or are they asking you for money?

There are great accounts out there that provide excellent infographics and educational material. These are great places to learn and you can take this information and save, invest, manage your pensions on recognised and regulated platforms.

In general, investing or transferring money via social media because of what you have seen from a finfluencer is never a good idea. Should it turn out to be a scam, you will have very limited recourse to get your money back.

What about the regulation?

The Financial Conduct Authority does not regulate finfluencers as an entity. However, financial promotions are regulated by the FCA as is financial advice. 

The FCA states that unauthorised individuals should give people personal advice on the merits of certain investments, as this will likely be subject to regulations and it could lead to action being taken against them.

Similarly, regulated individuals or firms need to be careful what they promote on social media. In one instance, the FCA found that a director of a regulated firm was using their personal profile to promote the advice of unauthorised traders and other financial products.

As a result they were blocked by the FCA from using their personal social media to promote financial services and the firm was required to halt any financial services promotions.

The FCA has recently teamed up with the Advertising Standards Authority to help educate finfluencers about the risks involved in promoting financial products.

Sarah Pritchard, the FCA’s executive director of markets said the FCA has seen more cases of influencers touting products that they shouldn’t be.

‘We want to work with influencers so they keep on the right side of the law, as this will also help protect people from being shown scams or investments that are too risky’, she said.