June 20th, 2024

Are your clients following “finfluencers”? Here’s why a qualified approach could be safer

If you’ve never heard of a “finfluencer”, the word describes a “financial influencer” – or in other words, a popular social media user who offers financial advice.

A recent piece of research, published by Professional Adviser, indicates that although reliance on “finfluencers” is decreasing, a large number of people still look to social media for financial advice.

Indeed, the study found that since the end of 2021, 37% of Generation Z and 42% of millennials still rely on these social media “advisers” for financial advice.

What’s more, 52% of people across all age groups still make changes to their investment portfolios based on what they read in the media.

Despite the high number of people who act based on media reporting and social media, 87% of study participants said they have insufficient knowledge to manage their portfolios in the current climate.

Keeping all this in mind, read on to learn why steering your clients away from finfluencers and towards qualified financial planning could be important in today’s world.

Finfluencers offer a one size fits all solution

The difficulty with offering broad stroke advice online is that the thousands, or even millions, of users reading this advice are unique individuals.

This means that no matter how “good” the advice is, the influencer hasn’t considered:

  • How much their audience can afford to comfortably invest
  • The goals they are pursuing, financial or otherwise
  • How many financial dependents they may have
  • Their appetite for risk
  • Their prior financial knowledge or experience.

If your client were to invest, take out protection, or make pension decisions from online advice, they could be following a path that doesn’t suit them – or worse, this could actually hurt their wealth.

On the other hand, independent financial advice offers your clients a truly bespoke service.

With access to the whole of the market, independent financial planners can look carefully at your clients’ finances, speak to them at length, and tailor a solution based on their needs.

Many online “advisers” could have their own gains in mind

When you watch a video or read a post on social media, you know very little about the person posting it.

While they might give a backstory about their experience or qualifications, it’s hard to know if this is even true. What’s more, your clients may not realise that there may be something in it for the finfluencer, too.

For example, a popular finfluencer could be extremely encouraging about investing in a certain type of stock or asset because it could “make you richer”. But behind the scenes, they might have their own reasons for recommending this product, be it family ties or corporate affiliations.

Once again, your clients wouldn’t have to worry about this with an independent financial planner. Without bias, an independent planner will perform the necessary due diligence to find the appropriate investment solution, package of protection, and pension options that suit your client.

After forming a financial plan that your client is happy with, a financial planner will then make regular check-ins with them, staying with them over the years and ensuring the plan still works.

Offering unqualified, biased, or misleading advice is against the law

The laws around financial promotions are strict – and for good reason.

The Financial Conduct Authority (FCA) has laid out guidelines around financial advertising on social media. The rules state that promotions must be “fair, clear and not misleading, meaning they must have balance and carry the right risk warnings so that people can make well-informed decisions”.

Further to this, the FCA’s Director of Consumer Investments says, “Promotions aren’t just about the likes, they’re about the law. We will take action against those touting products illegally.”

While the FCA is doing all it can to protect your clients from unlawful and unqualified finfluencers, some may still slip through the net.

As such, ensuring that you discuss a more appropriate path to advice with your clients, including working with a financial planner, could be prudent.

Informing your clients about the potential risks of acting upon the advice of finfluencers may help to protect them against financial losses over the long term. What’s more, it could encourage them to consider qualified, professional advice that may be a safer alternative.

Get in touch

Our independent financial planners offer qualified, regulated, and bespoke advice.

To learn more about what we do and the benefits of independent advice, email enquiries@prosserknowles.co.uk or call 01905 619 100.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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