Should you take financial advice from social media?
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Recently, there has been a crackdown on social media influencers promoting “dodgy” investments on social networks like Facebook. In May 2024, the City watchdog – the Financial Conduct Authority (FCA) – charged nine “finfluencers” for promotion breaches. The defendants included well-known stars from Love Island and The Only Way is Essex (TOWIE), with a combined Instagram following of 4.5 million people.
This is the first prosecution of its kind in the UK, and it naturally raises the question again: “Should you take financial advice from social media?” Below, our team at Castlegate explains the case for using caution online and using authorised financial advisers instead.
We hope these insights are helpful. To discuss your own family financial plan with us, please get in touch to arrange a no-obligation financial consultation at our expense:
01476 855 585
info@casfin.co.uk
What is popular is not always correct
Many of the defendants in the above FCA legal case have not risen to prominence because of their financial knowledge. Rather, they gained fame through reality TV and have then used their brands to venture into investing.
Naturally, many people will listen to their financial advice because they are fans of Love Island or TOWIE. However, due to their lack of professional training, “finfluencers” often fall into the trap of saying there is a “right” or “wrong” way to invest, manage money or build a financial plan.
The truth is far different. Each person is unique and will, therefore, require a tailored plan which is suited to their needs and goals. A seasoned financial planner will take time to get to know your starting financial position, your target destination and how to get you there.
The “relationship disconnect”
Many of us feel like we “know” our favourite TV stars, film celebrities and social media personalities deeply. There is nothing wrong with this, but it can create a false feeling of intimacy. Although someone may care deeply for a finfluencer, the reality is that the celebrity likely has no idea who this fan is.
This creates a great danger for the people listening and building a sense of loyalty to the celebrity. If someone listens to the finfluencer’s advice about investing in a certain product and things go wrong, where does this person turn?
By contrast, working with a professional financial adviser gives a reliable line of two-way communication (between the client and the adviser). If you feel anxious about a financial decision you have taken, you have an expert to talk to. Moreover, there is a strong line of accountability. If you are poorly advised, the FCA and Financial Ombudsman Service can help protect you.
Algorithms do not always follow prudence
Take a moment to consider the business models of social media platforms like Facebook, Instagram and TikTok. Their goal is to try to “hook” people onto their platforms and keep them online as long as possible. This allows them to earn more revenue from their advertisers.
As such, it is not intrinsically in the interests of these platforms to push sound financial and investment advice to users. Only insofar as this content helps to keep users engaged, unfortunately, the algorithms have learned that this is often best achieved by playing to our emotions – e.g. creating outrage or panic through alarming headlines.
This approach is very much at odds with traditional financial advice. Here, the emphasis is on calmly surveying different financial options in a comfortable timeframe. There is no pressure to rush to a decision. The adviser’s costs are disclosed to you at the beginning to the process, letting you know exactly what you will pay if you decide to proceed.
How do I navigate financial advice on social media?
If you use social media, it will likely be impossible to completely “shield” yourself from finfluencers and other content creators who may not be helpful. However, there are steps you can take to prevent unwelcome sway over your financial decisions.
One important step is to check the finfluencer’s qualifications and credentials. Are they an authorised financial adviser or planner in the UK? Do they work for a company which is registered with the FCA and do they have a track record of helping clients with building their bespoke financial plans?
Another good idea is to check the finfluencer’s words carefully. Do they push specific products, or is their content more focused on “timeless investment principles” (e.g. the importance of diversification)? In the above FCA legal case, the big problem was that many of the celebrities were pushing “CFDs” (contracts for difference), which are notorious for losing customers’ money. Again, it is worth stressing that tocial media ‘advice’ is not tailored and has far less accountability and regulatory protection.
Many finfluencers do not go this far. However, they might recommend certain investment platforms/brokers to their viewers based on sponsorship deals. Here, the lines can start to get blurred again. Is the influencer pushing the company because they truly think it is the “best”? Or, is it merely the one offering them the best sponsorship deal?
Invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
