Can You Trust Social Media for Financial Advice?

A benefit of social media is that it gives everyone a voice. Of course, this can also make it risky, as it’s not always clear who is worth listening to. So should you rely on social media to help with your financial decisions, and how can you know who to trust?

How Money Influencers Work
First of all, we should consider how money influencers work, how they get paid, and how they build a following.

In the vast universe of YouTube, Instagram and TikTok, it takes time and effort to get your voice heard. Content needs to be eye catching, instantly appealing, and different enough from the competition to merit any attention. It also needs to make you want to buy into the aspirational lifestyle they are selling. An informative video about sensible budgeting is unlikely to gain as much traction as a catchy sound bite, preferably with a scenic backdrop and optional dance moves.

The result of this is that the money influencers who are the most visible are not necessarily the most qualified. Even those who do have something relevant to say may find that their voices are lost if they don’t resort to gimmicks.

Professional influencers are paid to promote products. This can take the form of reviews, paid posts, or affiliate marketing. While most platforms now require influencers to disclose promotional content, this is not a regulated industry. And even if the content is above board and the product is legitimate, you can’t really be sure if it’s any good without further research.

Of course, there are some genuine and knowledgeable money influencers out there. To work out whether an influencer falls into that category, it’s a good idea to sense check their advice against the basic principles of financial planning.

The Basics of Financial Planning
There are no secrets or tricks involved in financial planning. Influencers might package their advice in a certain way to make it more interesting, but should still broadly encourage the following:

• Manage your budget and avoid overspending
• Keep debt under control
• Build up a cash balance for emergencies
• Make sure you have enough financial protection
• Plan for retirement.
• Invest in a wide range of assets at a suitable level of risk.
• Use established tax planning tools such as ISA and pension contributions.
• Be wary of scams, excessive charges, or anything that sounds too good to be true.

If the advice on social media deviates too far from these basic tips, or promotes gimmicky products that are difficult to understand, you may want to look elsewhere.

The Risks of Relying on Social Media
The main risks of relying on social media advice are:

• The people giving the advice are not always as qualified or knowledgeable as they seem.
• Their advice is not regulated and may not be fact-checked.
• The topics covered will be coloured by the person’s own experience, and not necessarily relevant to you. They may have made money investing in a particular stock or property, but that doesn’t mean it is right for you.
• The most visible influencers are usually the ones who have the most followers and likes, not necessarily the ones with the best advice.
• Many influencers genuinely want to help people, but the options they have to monetise their content are not always in the best interests of their followers.
• The anonymity of social media can make it easier for scammers to target victims.

Influencers to Avoid
If social media content includes any of the following, at best, it’s probably misleading. At worst, it could be a scam:

• Promoting a high-flying, aspirational lifestyle.
• Suggesting you can get rich quick with very little effort.
• Advertising obscure financial products that aren’t clear about the risks or charges.
• Contradicting common sense financial advice, for example, by suggesting you can get out of debt by day trading, or that you should put your savings into cryptocurrency rather than an ISA or pension.

When Social Media Can be Useful
When used in the right way, social media can help you with your financial plan. It’s easier than ever to find information or seek advice, as long as you are careful about who you trust.

Some ways in which you can use social media for financial tips are:

• Follow the accounts of regulated businesses. Not all financial services firms are active on social media, but if you find one with engaging content, you can check the Financial Conduct Authority’s website to confirm if they are authorised to give advice.
• Follow influencers who give common sense tips which follow the basics of financial planning.
• Join groups for people with similar financial goals, for example, saving money, reducing debt, or aiming for financial independence. Not all of the advice will be helpful, but the sense of community can help you stay on track with your financial plans.
• If you are considering a financial decision, social media makes it easy to research the options. While facts and recommendations should not always be taken at face value, you can usually build a good idea of other people’s experiences in the same situation. Scams are often rooted out quickly by the social media hive mind.

Social media is a tool like any other when it comes to financial planning. It is not inherently good or bad, and when used sensibly, can help to enhance your financial plan. However, you need to stay vigilant and be careful not to believe everything you see.

Please don’t hesitate to contact a member of the team to find out more about financial planning.