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Social media: be wary of bad advice

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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.

Facebook, YouTube, Twitter and other social platforms can be a great place to interact with friends and find useful, entertaining content. One problem, however, is the rise of financial influencers (“finfluencers”) on these platforms who have limited investment experience, few qualifications – if any – and no regulation by the Financial Conduct Authority.

In some cases, these content creators can give advice which leads people to make poor financial decisions, such as investing in the latest cryptocurrency. In worst cases, viewers can be led to choices which result in financial ruin – such as losing life savings on a single, poor investment that the content creator recommended.

At Castlegate, we recognise that the modern world uses social media and have no intention to disparage it. However, we want readers to realise that these platforms are still poorly regulated, that we are all impressionable and that we all need to be wary when approaching content made by “finfluencers”. Below, we outline some ideas about how this can be achieved.

We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:

01476 855 585

Why regulation is lacking

As a democratic state, it is difficult for the UK to censor websites, blogs and social platforms from featuring content which may feature unregulated financial advice. For instance, a content creator in Croatia could upload a video to YouTube about stock picking tips from her home country, which is then consumed by people in the UK.

Some platforms have started introducing measures to limit the harm of unregulated content. For instance, TikTok banned investment ads on its platform earlier in 2021, and Google now forces advertisers to disclose their regulatory status in the UK before promoting financial services on YouTube. However, this is not enough to stop bad advice being published.

Another issue is that finfluencers tread a fine line between offering guidance on financial topics and offering advice on products. To provide the latter legally in the UK, you need to be regulated by the Financial Conduct Authority (FCA). Yet not all finfluencers are based in the UK, and those who are might word their content in such a way that it sounds like guidance, but enters a “grey area” where viewers can hear it as advice. It is not clear that the FCA has resources to examine every content creator and determine whether they have broken the rules.

Why it matters

If you do not use social media, then this may seem of little concern. Yet it is likely that people you know and love are active on these platforms, and may find “finfluencer content” that could lead them into poor decisions. It is important to recognise that we are all impressionable – even those of us who think we are not.

We can all be fooled by misleading statistics, likeable content creators and cleverly-worded material. Whilst many finfluencers may be genuine and may even offer some good content, it is important to be wary and protect yourself online. Remember, £63m has been lost to investment scams on social media over 12 months – with the victims primarily men, and young people. The cases often involve false endorsements from celebrities, with 47% focusing on cryptocurrency investment “opportunities”.

Ways to protect yourself

You cannot always stop fraudulent adverts from appearing on your social media feeds. Yet you can refrain from clicking. If the ad appears genuine and from a brand that you recognise and trust, then find the company’s website and search for the offer there. This helps ensure you will not be diverted to a landing page which appears genuine, but simply serves to steal information.

When viewing finfluencer content, always assume that the presenter is not an expert – until proven otherwise. Remind yourself that the size of their following and their likeability are not indicators of competence. If you find yourself liking the content they produce, take time to find out who they are. Are they regulated? Has their content been properly scrutinised by people with industry experience and qualifications?

Make sure you look out for “red flags” in the content. In particular, do they pressure you to “act now” to buy a particular investment? Are they pushy and do they stir up “fear of missing out”? Do they discourage you at all from doing your own research?

Be wary of “survivorship bias” – i.e. the most popular investors on, say, YouTube may be those who happened to do well with their investments in a given period. Those who have fallen out of favour may not have been so lucky. The finfluencer’s popularity, in other words, may not strictly be down to their proficiency with money or investing – it may be down to luck, which may not last and which may not be shared by viewers.

Conclusion & invitation

If you are interested in discussing your own financial plan with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01476 855 585