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The top 10 global financial institutions have 10 million followers on social media. Compare this to the top 10 finfluencers who have 64 million followers. Finfluencers are here to stay. They can improve financial literacy and encourage good money management. But finfluencers can also offer unsuitable advice, many ignore regulations and even perpetrate fraud. Kobus Wentzel, Executive Head of Sales and Distribution at 1Life Insurance, takes a look at how finfluencers can fit into the financial advisers’ world.
The rise of the finfluencer – how big is their impact?
Financial influencers have become so prevalent online that they have been given their own name – finfluencers! So vast is their impact that social media was identified as one of 6 factors changing the world of financial advice in a World Economic Forum July 2024 white paper on the future of financial advice.
Did you know? A FINRA Investor Education Foundation study found that 60% of US based investors aged 18 to 34 use social media to source their investment information.
The finfluencer appeal
Finfluencers’ main appeal is that they are accessible and relatable. Anyone can listen to and watch their favourites at any time, in any place. They offer information and posts that people can relate to, are short and sweet, and aren’t filled with jargon. Finfluencers also tap into the “how to get rich” aspiration.
The fundamental finfluencer problem
Finfluencers are easy to follow but their advice is unregulated and not personal.
As much as online personal finance posts attract views and likes, they can be problematic.
Social media platforms are regulated and so is financial advice, but platforms such as TikTok and Instagram exist in a world where regulation and compliance is not top of mind. Disclosure among finfluencers is limited, or even non-existent. A viewer would not know, for example, whether post was paid for, whether the information source was reliable or factual, and whether the host has any personal finance or investment knowledge.
This has proved problematic when it comes to investment advice. The WEF study reported that in 2021, 25% of all fraud losses ($770 million) reported to the US Federal Trade Commission were from fraud initiated on social media platforms.
Did you know? In 2024, a Telegram user in South Africa received a penalty of more than R1 million for giving trading signals on the platform without a licence.
Can financial advisers compete with finfluencers?
Despite these challenges, the finfluencer appeal is wide. But it turns out that financial advisers have many advantages when it comes to financial advice.
1. Play to your strengths
According to a January 2024 CFA study: The Finfluencer Appeal: Investing in the Age of Social Media, the main differentiators of professional advisers are that the information they provide “can be tailored and comes with assurances of quality, professional competency, and duty of care. Advisers must emphasise these elements in their value proposition if they are to stay competitive in an increasingly digitalised world.”
2. Help your clients navigate the world of finfluencers
Ensure that your clients and their family members:
- Understand that disclosure on platforms is limited: Clients should be aware of potential conflicts of interest and the risks associated with certain products and advice.
- Be aware that finfluencers offer a one-size fits all model: Their advice is not personalised and may not be appropriate.
- Check the background and qualifications of the host: If they are recommending an investment or strategy, do they have the necessary qualifications, experience and knowledge to make a reliable recommendation?
- Know that finfluencing is a business and many posts may actually be advertisements: the average remuneration for a static post from a local influencer is R4 345, and R7 335 for a reel. An influencer with 500 000 to 1 million followers can earn over R18 000 a post. The motive for the post may be purely financial, not altruistic.
- Watch out for scams: Do not part with money or personal information until everything has been thoroughly checked and verified, preferably with a financial adviser."
3. Work with or become a finfluencer
Social media can boost your profile and be a good way to connect with current and potential future clients. Even a presentation on YouTube can be a place you can point clients to so they can learn more about the financial world.
Alternatively, you can team up with a finfluencer and establish yourself as an expert - perhaps by giving a quick interview reel where you explain a financial concept or product.
3 factors are key to success on social media:
- Be authentic
- Be consistent, in your views and when you post
- Learn to unlearn and the learn again
And follow regulations. Disclose in accordance with FAIS and any other relevant regulations, and as you would to a client.
Leverage the positives of finfluencing to give you more time, more advice, and more success
Finfluencers have shown us that people want to learn more about money and need personal financial advice. You can offer that. Consider the new world of finfluencing and how you can work with, it could be a growth area for your business.
Two good reads for in depth views on social media and financial advice:
January 2024: The Finfluencer Appeal: Investing in the Age of Social Media Serena Espeute and Rhodri Preece, CFA
July 2024: World Economic Forum: The future of financial advice