Just because someone has a lot of followers doesn’t mean their advice is right for you.
Social media influencers are increasingly sharing information about investing. This can be done by ordinary people or by celebrities who have taken an interest in a specific product or investment.
They are often called “finfluencers” — financial influencers whose media accounts are focused on money and investing.
Social media content creators can reach a wide audience very quickly. An influencer can potentially affect the decisions of thousands or more people through their posts or videos.
Finfluencers might use their social channel to:
- Share information about their own investment portfolio
- Recommend what financial product or investment to buy or not buy
- Give advice on how to manage your money
- Wear branded clothing or advertise a financial brand
- Tell you about an investment opportunity hot tip
Sometimes information is shared in a balanced, factual manner. However, anyone can act as a finfluencer without having qualifications or training in the financial sector. Misinformation can spread just as quickly as facts.
If you come across financial advice from a so-called expert on social media, ask yourself:
- Are they being paid to endorse a product? Influencers and celebrities may post financial advice or investment recommendations because they are being paid to do so. This doesn’t necessarily make the advice relevant to you or your situation.
- Are they qualified to give financial advice? Check to see if this person has a financial certification or professional designation of any kind. If they are registered as a financial advisor or investment dealer, check their registration to find out if they are in good standing.
- Are they making big promises? Some influencers may make big promises about investment strategies or stock picks, without necessarily showing data to back up the claims. While it’s possible some recommendations may turn out to be valuable, others may end in failure. It’s wise to take such recommendations with a grain of salt and seek a qualified second opinion before acting.
- Are they an expert or an entertainer? Social media influencers thrive on building a wider audience for their content. As a result, they may use tactics to make their content entertaining and enjoyable to increase their audience. That can mean their advice is for mass consumption and not relevant for individuals planning their finances.
- What’s the risk to me if this advice goes wrong? A finfluencer might give specific tips about what investments to purchase or how much to invest, but they may have very different portfolios or budgets than you. The reality is only you know how much you have available to invest. Know your risk tolerance, and don’t invest what you can’t afford to lose.
There’s nothing wrong with consuming social media. Keep in mind that your own financial goals and needs are personal. Advice shared by finfluencers may be popular but that doesn’t necessarily mean it’s right for you.
When considering financial advice, remind yourself of your own financial goals. Seek a qualified second opinion before making a significant financial decision.
