As an IFA, it’s likely that you, your family, your friends, and your clients all use social media.
From professional sites like LinkedIn to short-form content apps like TikTok, social media is now the go-to place for people of all ages to communicate, share news, and even learn new skills.
But as you will know already, some aspects of life don’t belong on social media – one of which is money.
Yet there is an increasing number of “finfluencers” (influencers who focus on finance) who offer mostly unregulated, unqualified advice online. The TikTok hashtag #fintok has had hundreds of thousands of posts attached to it, showing the prevalence of this form of “advice”.
Sadly, research conducted by Capital One revealed that 13.7% of consumers now take financial advice from social media. But 74% of those who have followed this social media advice have lost money or experienced an “undesired outcome”.
So: should IFAs be worried about finfluencers, and if so, what can be done? Keep reading to find out more.
At worst, finfluencers could cause harm to your clients and their wealth
As is the case with fashion, beauty, and practically any other sector or industry under the sun, there’s a clear market for influencers who focus on finance. Social media users want free, easy-to-apply tips that will help them make or save money – it’s as simple as that.
But as you already know, most finfluencers don’t have consumers’ best interests at heart. Their (almost always unregulated) advice could range from the “best stocks to buy this month” to “basic budgeting tips” and anything in between. While some of this information may be relatively harmless, some could cause your clients to take actions that are detrimental to their wealth.
To sum it up, the harmful aspects of finfluencer activity on social media are:
- Often, their advice breaks the FCA’s rules on financial promotions (more on this later)
- Their recommendations are usually biased and may not be right for a viewer’s specific circumstances
- Finfluencers may be being paid by providers or companies to promote certain financial behaviours or actions
- Consumers aren’t protected if something goes wrong after following the advice of a finfluencer.
You might be thinking: “If my client knows they can ask me for help, surely they wouldn’t follow the recommendations of an unqualified person online?”
This might be the case, but even so, it could be prudent to discuss the dangers of finfluencers with your clients when you see them for an annual review. Social media influencers are often charismatic and appear professional, which could lull your clients into a false sense of security.
Making it clear that these individuals can’t be trusted to provide fair, knowledgeable, and unbiased advice could prevent your clients from following a potentially harmful path.
The FCA is already taking legal action against some finfluencers
You’re likely already aware of the rules around financial promotions, particularly after the introduction of Consumer Duty in July 2023.
To ensure finfluencers are not breaking the law, the FCA has issued guidance that clarifies its expectations for how financial promotions must 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”.
Those who disregard these rules could be liable for criminal prosecution. In fact, the FCA recently brought charges against nine individuals for promoting an unauthorised trading scheme on social media. Some of these individuals are former participants on ITV reality show, Love Island, while others are known for similar reality TV appearances and social media fame. You may be unsurprised to discover that none are financial professionals.
While the FCA has begun to clamp down on finfluencer activity, you and your clients may need to remain vigilant. As your clients’ go-to financial expert, you can encourage this vigilance and chat with your clients about the issues presented by social media “advisers”.
3 simple ways to have the “finfluencer chat” with your clients
Let’s take a look at some practical tips for warning your clients about finfluencers (without sounding like a fuddy duddy IFA who just “doesn’t understand”).
1. Stay up to date with finfluencer news and share specific examples
If you want to bring up the topic of finfluencers with your clients, it helps to back up your claims with evidence.
For instance, citing the FCA’s recent crackdown on specific social media users who have broken financial promotion laws could emphasise the seriousness of this subject.
2. Remind your clients they can ask you about anything
Often, clients don’t want to “pester” their adviser with “silly” questions – and this attitude may lead them to seek tips online.
So, if you’re discussing the potential dangers of finfluencers, remember to remind your clients that you’re reachable and are happy to discuss anything they like. Just stating this sentiment aloud may boost your clients’ confidence in you and encourage them to approach you for help in future.
3. Talk to other IFAs about this issue
When IFAs communicate with one another about issues we care about, we can enact change.
With this in mind, broaching the topic with your peers and colleagues could slowly bring the conversation about social media advice to the forefront of our profession. Ultimately, this increased awareness benefits clients and consumers.
Get in touch with us today
Being part of a network like Corbel Partners means belonging to a community of likeminded IFAs who are committed to protecting the standards of our sector.
Email hello@corbelpartners.co.uk or call 01925 637891.
Please note
This article is no substitute for advice and should not be treated as such.
