Be Wary of Social Media ‘Fin-Fluencers’

Online social media influencers have discovered the world of finance—and they’re doing their best to get your attention so they can tell you what to do with your wealth.

The rise of these financial influencers—“fin-fluencers”—is having a major impact on how many people get information and advice about the financial markets today. That presents potential opportunities—but more important, risks—for anybody who encounters these personalities on ubiquitous social media outlets such as YouTube, Instagram, TikTok and others. That likely includes your children or grandchildren, as well as you, your co-workers and your friends.

With that in mind, here’s what we think you and the people you care about should know about fin-fluencers—how they work and how to evaluate them. Armed with that information, you can decide which ones you feel are putting out helpful insights and which ones are disreputable or even dangerous to your (and others’) financial health.

Meet the fin-fluencers

Influencers are popular and/or charismatic people who use their status on social media to influence the decisions people make. There are influencers in the world of fashion, dating, kitchen gadgets, collectibles—pretty much anything these days. So-called financial influencers, or fin-fluencers, seek to influence their viewers’ financial decisions through their social media posts, memes, videos and podcasts. Some focus on issues such as how to save more money and reduce debt levels, while others make investment recommendations about a wide variety of asset categories.

Fin-fluencers as a group have firmly established themselves as in-demand sources of financial information and advice. For example:

• According to the North American Securities Administrators Association, most Millennials and Gen Zers get their information about investing from social media, rather than from brokerages or financial advisors.
   
• According to Bloomberg News, downloads of investment apps rose by 20% in 2021 from the year prior while actual time spent on these apps jumped by 90%.
   
• CEG Insights research shows that one of the top reasons people follow fin-fluencers is for personal finance advice.

In other words, fin-fluencers are attracting investors across age groups and demographics. The fact that they may have captured the attention of many people around you—from your heirs to your parents—means you should be paying attention.
 

Pros and cons of fin-fluencers

In general, there’s something to be said for what fin-fluencers do: making financial insights more readily available, in formats (such as well-shot videos) that prompt people to pay attention to important topics they might otherwise ignore. Likewise, fin-fluencers you encounter might make you aware of financial concepts, ideas and products that are new to you—and that may be worth looking into more closely or discussing with an advisor.

The challenge, of course, is that the information and advice offered via social media fin-fluencers may be just as likely to be incorrect, inappropriate or even predatory as it is to be helpful. For every seemingly reliable advice-giver, there seems to be at least one hyped-up personality spreading misinformation or half-truths.

The fact is, fin-fluencers present specific risks that aren’t commonly found among many other sources of financial advice. Consider: 

• Lack of expertise. Posting financial advice on social media doesn’t require financial experience or even much in the way of financial knowledge. It’s true that some fin-fluencers work or previously worked in the financial services industry in some capacity—but that alone doesn’t mean they are experts on the topics they discuss online. What’s more, many fin-fluencers lack any industry experience or credentials at all. That doesn’t make them bad people—but it does mean their opinions and advice may be no better than those you would get from a random person you meet on the street.
   
• Conflicts of interest. Fin-fluencers who promote certain segments of the market or even specific investments may be getting paid to do so by one or more companies that stand to benefit from those recommendations. Likewise, the fin-fluencers themselves might own an investment they’re hyping—in hopes that internet-driven hype will boost the investment’s value so they can then sell it at a profit.
   
• Lack of regulation. You may never know about a fin-fluencer’s lack of knowledge or conflict of interest because they’re not required to follow the same rules, laws and regulations as are professionals such as financial advisors and even most financial journalists these days (who have to disclose if they own any of the securities they write about). In other words, the amazing performance results cited by a fin-fluencer might not be true or entirely accurate.
   
• Popularity over quality. Like other social media influencers, fin-fluencers’ typical goal is to create as large an online community of followers and “likes” as possible—as more views of their videos can help them earn higher ad-generated revenues. This drive to build a big audience can mean fin-fluencers make comments and give advice with the aim of getting lots of attention rather than of delivering high-quality, useful ideas.

Ultimately, these problems can add up to an online world that’s a target for scammers and manipulators. Case in point: Eight fin-influencers were charged in a $100 million fraud scheme in late 2022. They promoted themselves as successful traders and gathered hundreds of thousands of followers on Twitter and in stock trading chatrooms. According to the U.S. Securities and Exchange Commission, “They bought certain stocks, then encouraged their followers to buy the same investments. But when share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without disclosing their plans to dump the securities while they were promoting them.”
 

Assessing the fin-fluencers

Not all fin-fluencers are fraudsters, of course—but you can see the risk of getting advice that’s bad or inappropriate for your situation is high enough to merit extreme caution. While it may be best to simply avoid or ignore fin-fluencers, chances are you’ll encounter them at some point—or a family member or friend will mention information they got from them.

When that happens, consider the following action steps:

1. Check credentials. Do the fin-fluencers have the required expertise to be holding court on the topics they’re discussing, or are they “just regular people” using their “common sense”? This is a crucial question to ask yourself if they’re doling out advice or making specific investment recommendations. Of course, even professionals with great expertise can make mistakes—but having a strong foundation of financial knowledge can make those mistakes less likely to occur. Note: Some fin-fluencers will talk about their “industry experience” in vague terms. Dig deeper: Were they a financial analyst—or did they work in a call center? If they claim to hold a financial designation, check that it’s from a reputable organization.
    
2. Watch for red-flag words and phrases. Promptly ignore any fin-fluencer throwing out terms like “guaranteed,” “can’t lose” or “a surefire winner.” The future direction of investments can’t be predicted with such certainty, so anyone who tells you they know what the future holds is lying. Similarly, watch out if the person creates a big sense of urgency—noting, for instance, that you need to buy a product or service right now or you’ll miss the opportunity. Another red flag: The fin-fluencer trash-talks “mainstream” professionals such as advisors or accountants and claims to be the one with the “real” insights you won’t get anywhere but this person’s YouTube videos.
    
3. Dig into their performance history. When fin-fluencers highlight their previous investment recommendations that paid off big, do some digging. If the red-hot returns you’re being shown occurred over a very short period of time, look out longer to see if the investment cratered soon afterward. You can also do some online detective work to see whether the person made several bad predictions that they are burying or failing to mention.
    
4. Question their compensation. If fin-fluencers are being paid by companies they’re endorsing, they should disclose that information. In reality, that doesn’t always happen—and chances are, regulators aren’t keeping up with every social media influencer out there.
    
5. Know what you’re being pitched. Some fin-fluencers focus on broad-based personal finance topics like financial literacy and budgeting/debt management, and talk about big-picture concepts. Others zero in on specific products or market segments, in many cases recommending (even hard-selling) specific investments. Think carefully about whether the fin-fluencer’s goal is to educate you or motivate you to buy something. And if it’s the latter, watch out for those red-flag words noted above.
    
6. Control your FOMO urges. While you’re evaluating a fin-fluencer’s behaviors, think about your own attitude. Do you have a strong urge to be an early adopter of a new product or strategy? Do you have FOMO—“fear of missing out” on the latest and greatest? If so, you may need to control your emotional reactions to dynamic online influencers so you don’t make rash moves that hurt you in the end.
    
7. Focus on information, not personality. Fin-fluencers often share stories of their own path (to financial success, freedom, etc.) in hopes that you’ll feel personal connections with them that build trust. Many of them are also very outgoing and charming. That’s fine. Just remember to focus on the quality of the information they’re giving rather than how much you might like them, see yourself in them or aspire to be like them.

Conclusion

Ultimately, the best financial advice will reflect your own values, wants, needs and so on. Fin-fluencers, who by definition target a mass market audience, simply can’t provide insights tailored to your personal situation. While they can potentially expose you to new and interesting ideas, it’s crucial that you—or your parent, child or grandchild who encounters these online personalities—approach those ideas with a healthy dose of skepticism and ensure the next step is to do more homework rather than act impulsively.

ACKNOWLEDGMENT: This report was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families, and is distributed with its permission. Copyright 2024 by AES Nation, LLC.

DISCLOSER: This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Securities are offered through The Blakeley Group Inc. Dick Blakeley is a registered representative of The Blakeley Group Inc. Dick Blakeley and The Blakeley Group Inc are not affiliated with AES Nation, LLC. AES Nation, LLC is the creator and publisher of the VFO Inner Circle Flash Report.