Digital Friday >>> Is Your Financial Advisor a TikTok Star?-Financial Misinformation on Social Media
Updated: Oct 8, 2021
Picture Credit: Karolina Grabowska
Influencers amass massive followings on social media everyday. These influencers, through the content that they create and publish, build a relationship with their fans and gain their trust. As a wise man once said, with great power comes great responsibility, but influencers on social media take that advice with a grain of salt when money is involved. Financial misinformation is spreading on social media at an exponential rate, and this seamlessly innocent and free “advice” from influencers are actually just manipulating their fans to squeeze out a quick buck.
Under the hashtag “investing” on TikTok, which has accumulated 3.3 billion views worldwide, one anonymous user uploaded a video of them sobbing over plummeting investments with the caption “ I lost all my college savings ''. The platform is filled with similar stories of people losing all if not most of their investments. F and C Investment Trust recently conducted a research program which concluded that 1 in 6 British youth between the ages 18 - 23, invested for the first time in their lives between the start of the pandemic and May of 2021. Most of these young investors are getting their financial advice straight from their social media feed.
The recent boom in trading has had very real side effects on financial markets. Nikhil Rathi the Chief Executive of the FCA (Financial Conduct Authority) commented that “more people see investment as entertainment - behaving less rational and more emotionally, egged by anonymous and unaccountable social media influencers”. Many professionals are concerned that unregulated social media influencers misleading their fans will derail the whole perception of the industry.
Even so, not all the influencers are jumping on the “make money quick” bandwagon. Many TikTok accounts also provide sound and accurate financial advice. Timothy Paul for example was a graduate of economics and finance from the University of Sussex. Paul shares his knowledge and experience on TikTok with his viewers and gives short, broken down and informative information on personal finance. He has since then gained over 400,000 followers on his page, or even Elvire Matu, who shares tips and tricks with her audience on how to save money
Picture Credit: David Mcbee
There are people on sites and social media in general that do want to make people's lives better by offering good financial advice. Unfortunately, there are also many more channels who simply want to profit off their viewers by promoting very shady and questionable products, but the viewers don't think twice about it because their favourite influencers recommended it. They don’t suspect that their favourite content creators will sell out their trust in exchange for a quick buck. Elvire Matu comments “ I think a lot of people have a get-rich-quick mentality, it's easy to get scammed”.
“Our industry is very shady. It’s 95% bad groups practicing get-rich-quick schemes” comments Arshia Sarkhami, co-founder of Asset Entities. The promise of earning money at a young age through investments as a side hustle sounds very appealing to most of the younger demographic, especially when the idea is supercharged with lies that promise unfathomable returns. Harrison Chapman who is a 17-year-old student from Kent comments “The idea of investing a small amount and making X in a week, that is very appealing. I think that can pull a lot of younger people into a trap”.
This new industry then needs to be heavily regulated as it isn’t ethical to promote products to a younger, more susceptible demographic. Regulators are working around the clock to take down such posts, but it is extremely difficult with all the content that is being pumped out on social media. The FCA has warned that new investors are taking too much risk, and the constant exposure to massive financial gains and unrealistic returns on social media deter them from actually exploring safer and smarter mediums of investment. TikTok has been forced to protect their users from misinformation by banning the promotion of financial services as a first step to regulate the content.
October 8th 2021 | 2.30 PM