Depending on where you look on social media, making money seems to be straightforward. Learning how to buy a property in the UK with no money, or getting the basics of being a day trader in 30 minutes, are both lessons on YouTube, along with a plethora of advice on how to earn from cryptocurrency. Meanwhile “finfluencers”, with varying degrees of knowledge, have blossomed on Instagram and TikTok.
But the standard of advice varies widely from grounded, sage information on how to invest, to unregulated personalities offering shallow quick takes without fully setting out the pitfalls of what might happen to your money.
It’s a particular problem for young people. Those aged 18 to 34 are more likely to have built up an interest in investment from social media instead of traditional news websites, according to research from investment firm Hargreaves Lansdown.
So how can consumers ensure what they are watching and reading is credible?
Influencing investment
Social media platforms play host to a variety of advice and insights on personal finance. On TikTok, a space called FinTok has emerged with advice on budgeting, Isas, tax and debt – among other topics – which has been credited with attracting the interest of young people wanting to know how to use their money better.
At the same time, the platform has had a reputation for hosting videos which promote volatile cryptocurrency investment. Last month, it banned the promotion of financial services and products such as foreign exchange, cryptocurrencies and investment services.
In April, the Financial Conduct Authority (FCA) warned social media sites that it may take action if they continue to promote risky, and sometimes fraudulent, investments to often inexperienced consumers.
It followed concern about sites such as YouTube, Instagram and TikTok, and the emergence of the new breed of mainly younger DIY investors that it believes are taking big financial risks when investing in crypto and other high-risk products.
While the platforms also play host to established figures who give credible advice, there is a “dangerous detritus” of finfluencers without any skills or experience, says Sarah Coles of Hargreaves Lansdown.
“Social media is designed specifically to appeal to whoever is using it, so they see posts from people who are like them, and talk in a way they relate to, and they can join in the conversation, so they feel closer to the subject.
“It’s presented in bite-sized chunks so it’s all accessible, and the algorithms show us things specifically to pique our interest,” she says.
“The problem is that anyone can set themselves up as a finfluencer. In fact, it makes their life much easier if they’re unregulated, because nobody is monitoring what they say, so they can say what they like, in any way they want.
“If you’re using social media, and you have a choice of sensible advice from a regulated firm, complete with reams of risk warnings that make everything sound terrifying, or simple 30-second tips from a finfluencer who makes it sound foolproof, the temptation is to opt for the latter.”
Know what to look out for
With such a vast amount of advice across social media, it is worth keeping some core rules when deciding what is worthwhile and what is not.
Who are they? You don’t have to be regulated to set up as a finfluencer on social media. Nor do you need any knowledge, skills or experience. So approach personalities with a healthy degree of scepticism.
Popularity does not equal success. Just because a video has 100,000 views does not mean it is advice worth following. If there are some you think are valid, use the videos as a jumping-off point to do your own research.
It is always safest to assume that someone is not an expert unless proven otherwise. The lack of regulation means that people can say whatever they want about any topic, from buy-to-let to bitcoin.
Make sure you have the full picture. If someone tells you they made 50% on a bitcoin investment in the last month, that would be true. But it is also the case the price of the cryptocurrency has dropped by almost a third in the last four months.
It is important to have all the information at hand in order to make investment decisions, especially when someone may suggest that they have a surefire way to make money quickly. It may not be that the finfluencer is trying to deceive, simply that there is not enough space in the video to tell the full story – or they may not be well enough informed.
Ensure that it is not a scam. At a time when cyber fraud is a daily fact of life, scams proliferate on social media. In 2019, Action Fraud said that more than £3m had been lost in 356 fraudulent “get rich quick” schemes on Instagram over a five-month period, with most of the victims aged between 20 and 30. Scammers promised high returns within hours of investing.
It’s not all about getting rich quick. Big rises will always catch the eye – spikes in cryptocurrency being a particular example. But getting returns slowly, over time, while it may appear boring, can also transform your life over a few years.
Don’t depend on people who you think are just like you. There are many ordinary consumers who share their experiences of saving and investing. Focus on how good the advice is, rather than any shared history.
Coles says: “We like to hear from normal people, and that is the whole appeal of social media – they are someone just like you, that have done something, and can tell you all about how they succeeded.
“Part of the problem is the seeking out of other people like us, rather than seeking our expertise.”
