“Finfluencers” – harmless fun or a danger to your clients’ money?

Find out how social media "finfluencers" could be affecting your clients’ financial wellbeing and discover three ways you could help them protect their wealth.

In recent years, social media has become part of everyday life. For people of all ages it’s the go-to place for keeping in touch with friends, sharing information, and everything in-between.

While platforms such as Facebook and Instagram can be a convenient and fun way to access content on the go, they’re not necessarily the best places to seek financial advice.

Yet, research from Capital One (8 January 2024) suggests that 13.7% of UK adults now turn to social media for advice, but of these, 74% lost money or experienced an undesired outcome.

Unfortunately, “finfluencers” – social media users who offer financial advice – are typically unqualified and unregulated. So, relying on them could pose a risk to your clients’ wealth.

Read on to learn why your clients may want to think twice before taking advice from finfluencers and discover three helpful tips to help them navigate social media more mindfully.

Many finfluencers are unqualified and unregulated

The FCA (26 March 2024) has issued guidance that clarifies their expectations for how financial promotions should be communicated on social media.

Finfluencers are legally obliged to ensure that any advice they give regarding financial products is “fair, clear, not misleading, and supports consumer understanding”.

Anyone flouting these rules could be liable for prosecution – in fact, the FCA (3 July 2024) recently brought charges against nine individuals for promoting an unauthorised trading scheme on social media.

Indeed, finfluencers are unlikely to share the necessary risk warnings and disclaimers that are required to allow your clients to make an informed decision. The FCA (26 March 2024) recently reported that it removed 10,000 “misleading” adverts in 2023, up from 8,500 in 2022.

While the FCA has begun to clamp down on how firms and finfluencers use adverts across social media, your clients need to remain vigilant.

If your clients rely on finfluencers for financial advice, they could be exposed to inaccurate and misleading information without realising it, leading to potentially damaging decisions.

Online “advisers” rarely offer bespoke financial planning solutions

Finfluencers offer a “one-to-many” approach to financial advice. In general, they speak to the masses rather than offering guidance tailored to the individual.

While this one-size-fits-all financial advice tactic fails to consider your clients’ personal circumstances, challenges and aspirations, the most prominent online financial personalities can be extremely persuasive and charismatic.

This could mean that your clients waste valuable time and money on products and strategies that don’t help them progress towards their financial goals.

What’s more, some finfluencers may have vested interests in the products and investments they’re promoting. As a result, their advice may be biased rather than focused on your clients’ best interests.

In contrast, an independent financial planner will take the time to listen to your clients’ specific needs and provide ongoing support that aligns with their unique goals, timeline, and appetite for risk.

3 ways your clients could protect their wealth from the influence of social media

Fortunately, there are simple steps your clients could take to prevent the advice of a finfluencer negatively affecting their wealth.

1. Think carefully before connecting with someone new

Social media offers a fantastic opportunity to connect with friends, family, colleagues, and inspirational figures.

However, it's important to think carefully before connecting with or following someone new. Once your clients connect with a finfluencer they could be exposed to content, adverts, and sales pitches that may sway their judgement in unhelpful ways.

Remember, social media personalities are often charismatic and persuasive. So, if your clients connect with them, there may be a greater chance they’ll be tempted to follow their advice.

2. Limit daily use of social media

If your clients spend hours scrolling through social media, they’re likely to come across finfluencer content at some point.

What’s more, getting “lost” in mindless scrolling could make it harder to keep a sense of objectivity about the content displayed.

Fortunately, most modern mobile phones allow users to set a time limit for accessing social media apps or certain websites. This could be a clever way to moderate exposure to finfluencer content.

Controlling internet usage in this way could also ensure that your clients take a screen break and reflect on any finfluencer content they see, rather than acting impulsively.

3. Seek advice from a regulated financial planner

In contrast to most finfluencers, an independent financial planner is required to have certain credentials, accreditations, and qualifications in place.

We’re also overseen by the FCA and must comply with ethical codes of practice, such as Consumer Duty, which sets stringent standards of consumer protection.

Additionally, if your clients are unhappy with the service they receive from a regulated financial planner, they can pursue a claim through the FCA’s complaints procedure. In contrast, if your clients follow a finfluencer’s advice and this leads to a poor outcome, they’re unlikely to have any recourse to recoup their losses.

All in all, seeking advice from a regulated financial planner rather than relying on social media for financial advice could help your clients avoid costly mistakes and help them progress towards their long-term goals.

Get in touch

If you have clients who are relying on advice from finfluencers when planning their financial future, please get in touch to find out how a bespoke financial plan might serve them better.

Email lottie@truefinancialdesign.co.uk or call 07824 554288. I’m now back at my desk after having my little boy and I would love to hear from you and your clients.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.