Influencers are the backbone of many fashion, travel, and technology-related decisions we make. Research has shown that the industry was valued at $21 billion in 2023, with many predicting that the figure will grow even more.
One of the new areas influencers are creating content around is finance. Nicknamed ‘finfluencers’, these popular content creators share tips and tricks and endorse new financial tools, services, and products to help their fans make money.
Because these people lead such successful lives, we’re inclined to believe them when they talk about how they save money. But are they the best people to give financial advice?
The dangers of listening to finfluencers
The influencer market is fast-paced and ever-changing. But there are three core reasons why it doesn’t mix well with personal finance. They are:
Are they being paid to promote something?
The first caveat of listening to any influencer is working out what’s driving them to create content in the first place. As skeptical as it might seem, most influencers are being paid money to direct their audience to a product, a service, an app, or an issue.
So many are turning to financial advice because it is a lucrative niche, with finfluencers charging between $2,500 to $20,000 per post. Banks, app developers, and websites are keen to pay this money to attract new business.
So, how do you know if someone is receiving payment for “advice?” Unfortunately, countries are playing catch-up to regulating “advice” disguised as advertising. In 2022, a European parliament-commissioned study into the influencer industry found a significant lack of transparency and non-compliance in disclosing sponsorship in posts.
As more influencers begin to label content that is being sponsored (usually with the hashtag #AD), this can help consumers follow the advice and make a more informed decision about the content they’re viewing.
Are they financial experts?
Influencers are often very good at trendjacking, i.e., pivoting their content to a new trending topic or rising issue. One day, they’re creating content in lifestyle or fashion, and the next, they change to finance and offer advice as an ‘expert.’
This can be dangerous because influencers may have garnered a dedicated online following in one area with no financial material involved.
In 2022, Kim Kardashian was fined $1 million by the SEC over her failure to declare she was being paid to promote cryptocurrencies, which at the time was experiencing a massive spike in investment amid the global pandemic.
It’s safe to say that since her fame did not stem from cryptocurrency, this sudden pivot in content was seen as exploitative. If the person you’re following online has no history or background in a particular area of finance, then you need to be extra critical of their advice.
Though rare, there are instances where finfluencers have purposefully spread wrong financial information to defraud their following and capitalise on poor investments. In 2022, several social media influencers were charged with supplying misinformation to over 1.5 million followers. They used their ‘extravagant lifestyles’ to appear as financial experts while operating a ‘pump and dump’ scheme.
Fans were encouraged to invest in specific stocks, which finfluencers sold afterward for a premium. Don’t be fooled by what people post online. Someone’s success and wealth may not have come from financial advice.
Are there any benefits to finfluencers?
Despite these warnings, there are some benefits to finfluencers, especially regarding cybersecurity. That’s because many are helping to spread information on essential security tools that can help protect your information online.
Creators use straightforward, easy-to-understand language to explain complex things, like how to block intrusive ads or what is a VPN, all to help protect our online security.
In this way, influencers teach fans to take better care of their digital footprint, heighten their awareness of cyberattacks, help mitigate an attack, and remain safe.
A Few Final Words
Although finfluencers are bringing new eyes to financial opportunities and aiming to ‘educate’ people on ways to save money and invest wisely, people should still be wary of what they read online and who they listen to.
The influencer industry is still grappling with proper regulation, and until appropriate rules are in place, it can be hard to see the true motive behind their advice.
To ensure you make the right financial choices, never feel pressured to make decisions without double-checking the facts presented. Always seek impartial advice from a qualified financial expert before making investments.