Finfluencers: Friend or Foe?

Financial influencers, aka ‘finfluencers’ are becoming increasingly popular as more millennials and Gen Zs show a growing interest in money management.

Financial influencers, aka ‘finfluencers’ are becoming increasingly popular as more millennials and Gen Zs show a growing interest in money management.

Social media channels (Instagram, YouTube, and TikTok) have recently blossomed with finance ‘experts’ promising quick and easy riches. Although it is great to show an interest in your financial wellbeing early on, it is also important to choose the right channel to get your information from.

 

Finfluencers have varying degrees of knowledge, but most do not hold an Australian Financial Services Licence. While most Australian finfluencers act responsibly, it still means that they are not subject to any codes and regulations that apply to financial institutions, such as regulations to act honestly, efficiently and fairly.

 

Across the ‘fintok’ landscape, the standard of advice varies widely from grounded, analytics-backed information on how to invest, to clickbait-y personalities offering shallow information without fully setting out the pitfalls of what might be behind those incredible offers.

 

So how can consumers like you ensure what you are watching and reading is credible?

How to filter quality information:

How to filter quality information:

Like most influencers, some finfluencers have a vested interest in the content and advice they’re sharing. They may have paid partnerships or receive financial remuneration from any action taken on the content they share. It is important to keep in mind that some of these people have no qualifications or meaningful experience within personal finance, beyond their own situation.

 

Some things to ask yourself:

  • How transparent is the account? Do they list their partnerships or collaborations that they might be financially benefitting from?
  • How organic is their platform? Is their popularity (number of views, followers, post comments) on social media real?
  • You should also understand that most finfluencers’ content is almost always general in nature. If not, their advice is based on their own personal situation which might not be relevant or helpful to your personal financial circumstances.
  • Are you looking at the full picture? If you see someone bragging that they made 50% on a Bitcoin investment in the last week, it could be because the price of the cryptocurrency has dropped substantially in the last four months.

 

Beware of scams:

Beware of scams:

Dr. Angel Zhong, senior lecturer in finance at RMIT Melbourne, cautions the public against “pump and dump” scams, which are hugely popular with American social media users.

 

A ‘pump and dump’ scam occurs when someone, or an organisation, artificially inflates the share price of a stock or cryptocurrency by really pumping it up on social media to draw awareness to it (with the aim of increasing its trading). Once the price increases, they sell the shares at a hugely inflated price, pocket the profit and leave the market. This practice is illegal, based on securities law, and can lead to heavy fines. Read more here.

 

“I’ve seen people encouraging their followers to borrow on a specific lending platform to invest in a particular cryptocurrency or they’ve been encouraging some of their followers to quit their job and become a full-time day trader, which is a highly risky behaviour”, she says.

 

Dr Zhong also highlights the trickiness of regulating such schemes (by ASIC) when stories on Instagram can disappear after 24 hours.

 

Which channels provide quality information:

Which channels provide quality information:

Books, blogs or podcasts are great (and sometimes free) platforms that you should look into. Here are just a handful of our favourites:

  • Book: Rich Dad Poor Dad by world-renowned Robert Kiyosaki
  • Book: The Barefoot Investor by homegrown favourite Scott Pape
  • Podcast: My Millennial Money by Aussie financial adviser Glen James and property expert John Pidgeon
  • Blog: The Dave Ramsey Blog by Dave Ramsey

 

So, friend or foe?

So, friend or foe?

Simply put, finfluencers are a double-edged sword. Do not be quick to trust. It is essential that you undertake your own research into what you have seen on social media. It’s your money after all and, regardless of what advice is given to you, your financial future lies in your hands.

 

Part of the problem is that we like to seek out and hear from other people like us, rather than seeking specialised expertise.

 

 

We love informed customers! Share your thoughts and speak to one of our team on 1300 815 921 or at info@greenassociates.com.au

At Green Associates, all of our advisers are fully licensed and listed on the ASIC Moneysmart Financial Adviser Register. Green Associates is committed to providing the best solutions for you and your wealth-creation journey.