Why you should be wary of listening to financial advice on social media

By HarperLees

If you’re like the average Brit and spend at least 2.5 hours on social media every day, you will most likely have been subjected to plenty of adverts and promotional material among the cute animal videos and funny memes.

Indeed, if you’ve been searching for something online, whether that’s a brand-new car, the latest electrical gadget, or something interesting for dinner that a friend recommended, the algorithms may be targeting these items specifically.

Financial advice is no different. Moreover, while scrolling through Instagram, TikTok, or Facebook, you may well have come across promotions or advertisements from individuals known as “finfluencers”.

While some of the information provided may be sound, basing financial decisions on information found on social media platforms may not always be the best option.

So, read on to find out the reasons why listening to financial advice on social media may not benefit you as much as speaking to an experienced financial planner.

The information you view on social media may not be entirely accurate

When making any financial decisions, it’s important to do so knowing that the information you see, or have been given, is accurate.

While professional financial planners must pass various exams before they can practice, “finfluencers” might not have to be qualified in order to post online. So, the information, and the advice they may be giving, a far less likely to be accurate compared to the guidance given by experienced financial planners.

Influencers are also unlikely to be regulated and authorised to provide financial advice

In the UK, financial advice firms must be registered and regulated by the Financial Conduct Authority (FCA) to be able to provide financial advice.

However, social media influencers are far less likely to be regulated and authorised in the same way. In fact, in a consultation guide, the FCA states that influencers often have little knowledge of what they are promoting and the lack of expertise is reflected in the large number of promotions that are either non-compliant or illegal.

So, if you do see financial advice being promoted on social media, it’s unlikely that it’s been regulated or authorised by the FCA. This also means that there is little to no recourse if you follow the advice, and you end up out of pocket as a result.

Online financial content is not personalised advice

Great financial advice is based around your personal circumstances and your own plans for the future. However, any such advice found on social media platforms like TikTok or Instagram is going to be far more general and not necessarily tailored to your own needs, circumstances, or risk profile.

While some financial advice found on social media may be informative and relevant, seeking personalised advice from professional financial planners could be far more beneficial to you.

Social media influencers may have been given financial incentives to promote certain content

Quite often, influencers are given financial incentives for promoting certain products or services on social media platforms.

While not everyone will be doing so for this reason, it’s worth bearing it in mind when considering the viability of such advice.

For example, a lot of influencers won’t even have a financial background and are only promoting this “advice” because someone has paid them to do so.

An independent financial planner will take a wider look at your goals and individual circumstances and only recommend solutions that will help you to achieve your aims, not those they have been paid to promote.

Financial advice on social media could possibly be a scam

Criminals have been attempting to defraud UK adults through financial scams for many years. With the advancements in technology and social media, they now have a new weapon with which to target unsuspecting victims.

In fact, Action Fraud revealed that, in 2021, victims lost a total of £63 million to social media investment scams.

Sometimes, financial scams feature “pump and dump” schemes that spread misleading information to encourage people to buy shares and artificially inflate the price. The fraudsters will then sell their own shares at the inflated price. Following this, the share price typically falls and investors lose money.

Meanwhile, scammers also frequently utilise Ponzi schemes, where money from new investors is used to pay older investors and give the impression of positive returns.

Conversely, professional financial planners are FCA regulated and only invest in genuine funds and schemes, helping to protect your money and your investments.

Get in touch

One of the most effective ways of achieving your financial goals is working closely with an experienced financial planner. Some financial advice found on social media may be worthwhile and relevant, but that will never match the expertise and experience of finance specialists.

We will help you identify the best way for you to meet your targets, act as a sounding board for your ideas, and help you protect your wealth.

Please email info@harperlees.co.uk or call 01277 350560.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.