Instagram, TikTok and YouTube. The global pandemic forced an increase in screen time, plus a surge of retail investing and the frenzy around meme stocks. It also helped catapult finfluencers into digital fame, explains The Washington Post article, “Should You Trust TikTok, YouTube Finfluencers”.
Mostly young people give financial advice in short, catchy snippets on social media. But the rise of finfluencers―people who use social media as a platform to share advice on topics ranging from budgeting to buying a house, to investing― goes hand in hand with the democratization of finance, notes the article. Making high-quality financial information more accessible is a good thing. However, a lot of money advice out there is lacking in substance or is even disruptive.
Any consumer scrolling on social media needs to be discerning. The article notes finfluencer work as marketing and shares different strategies influencers use to make money.
First, brand partnerships in which “commercials” are created for financial services companies to promote products. These posts are required to be disclosed with language like “I’ve teamed up with” and include #ad and #partner in captions and on photos. This is a legitimate way for creators to make a living, but the key is having awareness of these relationships.
Another way to monetize is through selling your own content, from courses, worksheets and books to t-shirts, hats and tote bags. Content arrangements with the social media platforms can be had if your following grows large enough. But issues can arise due to a lack of transparency, regulation and credentials, cites the article.
Bad financial advice is nothing new, but it’s now everywhere. Doing due diligence and vetting whom to trust is particularly important when it comes to investing. Anytime you come across financial advice online, the article recommends a few things to consider:
- Do an audit of their social media feed to see what the person is promoting. Seeing well-curated ads for products like payday loans should be a red flag. Also scroll back far enough to see their collaborations. Partnerships with other finfluencers and actual experts can give you some insight into a person’s strategy and beliefs around their work.
- Ask yourself: Do you understand how this person earns a living? Is it clear when a brand partnership is occurring and does the influencer share their litmus test for taking on a partner? What gives them the credentials to be giving you the advice? Have they formerly worked as a trader and have a Series 7, Series 63 and/or Series 65? Are they a certified financial planner or working as a financial journalist?
- Question whether selling is dressed up as educating. A range of advice is given by finfluencers. Explaining how the stock market works or strategies used to invest is different from explicitly telling you which stocks to buy or what crypto and NFTs to purchase. Educating you and selling to you are two different propositions.
In many ways, greater access to financial information and having a wider range of people who can communicate such information are good things, the article explains. However, for investors looking for quality advice, it’s important to weed out those looking to cash in on a trend.
When it comes to issuers wanting to regularly communicate and engage with its retail investors, be present on digital platforms to maintain awareness. Look for ways to start conversations and put information out there that is transparent and digestible.
For brokers and advisors, showcase information in a way that draws in investors and enhances their understanding.
Consider partnering with Mediant, a provider of technology and technology-enabled solutions for client communications, to create engaging communications and enhance the investors’ experience.
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