The rise of social media has provided people with free access to information and has created the concept of ‘finfluencers’ – social media influencers who offer financial advice to their followers. Thulisile Nkomo, a private wealth manager at NFB Private Wealth Management, explains why people are turning to social media for financial advice, the dangers of accessing this advice on social media and how to separate financial fact from fiction.
Why do people turn to social media for financial advice?
People may find social media an attractive alternative to traditional financial advice because it is easily accessible and free. Certain content creators may also have a financial background and experience, which makes them seem like a trustworthy source to people. Social media also creates a safe space to talk about money, which was once seen as taboo, and for some, it helps break down financial barriers.
What are the dangers of accessing financial advice on social media?
Although social media is democratised, the advice offered may not necessarily address individual needs, as financial advice is not a one-size-fits-all solution. The financial advice provided on social media may not be verified, so it is important to do your research and verify any advice you receive. Many content creators may have their personal interests in mind, and their intention may not be focused on the benefits of the user. Moreover, many may not even have the skills or experience to even offer professional financial advice.
How can someone separate financial fact from fiction?
It is essential to familiarize yourself with the financial content provided by qualified financial advisors. This can be done through Moneyweb or institutional websites. Seeking professional financial advice is essential for fact-checking and verification. Moreover, asking a friend or family member to refer you to a financial advisor they have dealt with is also a wise move to make.
Should ‘finfluencers’ be licensed or regulated in some way to ensure they are held to a certain standard of conduct?
To give out any form of financial advice, you need to be a representative of an authorised financial service provider who is registered. Therefore, creating specific regulations to monitor the provision of financial advice on social media should not be a concern. However, it is important for people to verify any advice they receive and seek professional financial advice from reputable and authorised financial service providers.
• A survey conducted by VISA revealed that 51% of millennials take financial advice from social media influencers.
• The number of financial YouTubers increased by 50% in 2020.
• In 2019, the SEC sued four people who promoted ICOs on YouTube and social media.
Although social media provides a free and easily accessible service, accessing financial advice on social media platforms may be dangerous. Misinformation in financial advice can be costly to follow and can even lead to financial ruin. Seeking professional advice from reputable and authorised financial service providers is the safest way to manage your finances.
While seeking financial advice from ‘finfluencers’ may be convenient and free, it is essential to remain vigilant when following their advice. Verification of any information received is critical before making any crucial financial decisions. Considering licensed financial advisors with reputable financial service providers may help prevent falling prey to unverified financial advice. It is essential to exercise caution and diligence when accessing financial advice on social media platforms.