Is It Advisable to Seek Financial Advice from a ‘Finfluencer’?

In today’s digital age, social media has become a go-to platform for seeking advice on various topics. From makeup tutorials to DIY projects, influencers have taken over as the new experts in their respective fields. However, when it comes to financial advice, is it advisable to seek guidance from these so-called “finfluencers”?

A recent article from Kiplinger’s Personal Finance explores the phenomenon of finfluencers and the growing number of individuals turning to them for investment advice. A quick search on Instagram or any other major social media platform will reveal thousands of posts from a wide range of creators, showcasing their investment strategies and claiming big profits. These influencers have amassed millions of followers and are earning substantial amounts through advertisements, sponsorships, and consulting fees.

For some individuals, such as Denise Berkhalter, a single mother of two, these finfluencers have provided valuable advice and encouragement. Berkhalter mentions former Wall Street trader Vivian Tu, whose entertaining and relatable videos have inspired her to maximize her retirement savings and explore different investment options. Tu’s ability to break down complex financial concepts into understandable “bite sizes” and her willingness to share her own mistakes have resonated with many viewers.

However, not all finfluencers are created equal. Some promote strategies that may be inappropriate or unsuitable for the average investor. Additionally, social media platforms are rife with scam artists looking to take advantage of unsuspecting individuals. Federal regulations require influencers to clearly label any paid posts and prohibit misleading statements or fraud. The Securities and Exchange Commission (SEC) has pursued several high-profile influencers who failed to disclose their paid promotions or engaged in pump-and-dump schemes.

Despite efforts by regulators, monitoring and policing all investment-related content on social media platforms is a daunting task. Ankush Khardori, a former federal prosecutor specializing in financial crimes, explains that the sheer volume of content makes it nearly impossible for regulators to keep up. This poses a significant risk for investors, especially considering that a study by Finra found that 60% of investors under the age of 35 rely on social media for investment information.

The impact of social media investing frenzies on stock values cannot be overlooked. The article mentions the GameStop saga in 2021, where Reddit users engineered a massive surge in the stock’s value, causing turmoil in the market. These types of situations highlight the power and influence that social media platforms can have on investors’ portfolios.

While seeking financial advice from finfluencers can provide entertainment and inspiration, it is crucial to approach it with caution. Understanding the landscape and being aware of the potential risks is essential, as many individuals in your network may be influenced by these online gurus. As with any investment decision, it is wise to do thorough research, consult with professionals, and make informed choices based on your individual financial goals and risk tolerance.

In conclusion, the rise of finfluencers has undoubtedly changed the way individuals access and consume financial advice. While some of these influencers offer valuable insights and guidance, others may promote questionable strategies or engage in fraudulent activities. As investors, it is important to be discerning and cautious when seeking advice from social media platforms. Ultimately, taking a comprehensive approach to financial decision-making that combines multiple sources of information and professional guidance is key to achieving long-term financial success.