The morning I wrote this article, my Instagram feed informed me that a group of stocks were a ‘slam dunk’ for investing. The evidence? A series of clips of CEOs from those companies shaking hands with foreign leaders. Frankly, it did not convince me to make any portfolio changes.

I then scrolled through a series of other videos. The next showed me F1 driver Lando Norris taking the podium after his Monaco win. The one after told me what I should do with £5,000 (a few index funds to invest in, and a few more stock suggestions). The next video was a woman who told me how she made £500,000 by the time she turned 25.

I don’t follow any of those accounts on social media. But my platforms feed them to me, and millions of their other users, constantly.

The issue is, I don’t know who the person is. And without additional research, it’s impossible to know if you should trust them.

THE RISE OF THE FINFLUENCERS

When it comes to videos about cats or gardening tips, this stream of information can be relatively harmless. But in recent years, social media has seen the rise of influencers who focus on creating investment content, sometimes with little or no expertise on the topic.

There has been a growing trend of people offering financial advice, guidance, or information on social media. And sometimes, this comes from advisers or experts in the industry. But it could just as easily be coming from someone who has no knowledge of the investing world or its regulations.

According to a study by Barclays, over half of investment scams now happen over social media. And a study from Capital One found that out of those who have followed investment advice on social media, 74% have either lost money on the investment or hurt their credit score.

And not knowing who someone is seems to do little to deter people from listening. Barclays found that almost a quarter of Brits use social media or online forums for investment advice, which raises to 40% among people ages 18 to 24.

ARE THEY ALL BAD?

Like when searching for pretty much anything on the internet, there’s a lot of useless information to wade through before you find the helpful bits. But there are many (qualified) people who talk about investing online. It’s even led to an increase in investments: 38% of Gen Z investors in the UK cited social media as a major decision maker to invest, according to the Chartered Financial Analyst Institute.

There can be positive impacts of finance content on social media. But as a user, the trick is choosing the trustworthy sources.

One of the first steps to making sure an influencer is a reliable source is checking their affiliations and qualifications. The FCA has made this easier by offering a register of firms and advisers. This can be a helpful cross check to ensure a company or individual person has a legitimate standing. It’s also important to note that your social media feeds may hand you influencers from different countries. Remember that these countries likely have different rules and regulations to the UK, so even if they are accurate, it simply may not be relevant to you.

Once you’ve determined the baseline of if the influencer is qualified, it’s still worth double checking any information they share. Be especially wary of posts that hold affiliate links or seem like they are advertising other products.

According to research by the CFA Institute, 27% of posts by finfluencers contained an affiliate link. Many of these would come in the form of someone suggesting an investment and then suggesting a platform they should be investing on. Be conscious of what people are saying, and what motivation they have to say it.

UNDERSTAND THE NATURE OF THE CONTENT ITSELF

It’s also worthwhile to understand what kind of content you’re being fed. Are you simply being given information about investing, or are you being told what you should do? Even if you are just being given information, you can cross check the information with other sources you trust.

If you’ve determined that you have reliable information, it’s also worth considering if that information applies to your own situation. Depending on where you are in life, such as if you’re nearing retirement or about to buy a new house, you may have differing investment strategies. Or, you may just be comfortable with a lower level of risk. Even when information is true, it’s important to remember that this person isn’t aware of your specific situation. And it’s helpful to proceed with caution.

WHY DOES FINFLUENCING WORK?

The investment industry has long struggled with the reputation that putting money into the market is complicated and difficult. Finance is filled with jargon and acronyms that simply aren’t used in life otherwise. And finfluencers have found a way to make investing accessible to people who might have felt alienated by it before.

The CFA noted that many influencers were able to make investing fun – they introduced games or animations that made the concepts come to life. This is certainly valuable to get people engaged and can provide a more digestible format.

So, can we listen to finfluencers? At least for the moment, not fully. Although there is great content available, it’s mixed in with many bad apples. If you do choose to engage, it’s really important to find some second (and even third) opinions.

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