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Where do you go for advice about how to manage your money? For a lot of people social media might be the first stop — it’s quick, it’s convenient and it’s available whenever you want it.
And there is some good information there. Worthwhile posts from creators who know what they are talking about.
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But there are also posts that contain harmful misinformation rather than helpful guidance. Misleading or dangerous financial advice can sometimes spread unchecked, often outperforming legitimate information that is designed to empower. Viral does not mean truthful.
So if you’re going to click on the links and seek out information on social media, it helps to know what to look out for — and what to avoid.
Watch out for the scammers
The first thing to watch out for is out-and-out scams.
According to UK Finance, an industry group, last year 70 per cent of APP fraud cases — where the victim is duped into authorising the money transfer — were enabled by online sources.
Information shared on social media platforms is often only lightly checked, if at all, making it a frontline for scams. Algorithms favour catchy hooks over accuracy.
Victims of financial scams, misadvice or mis-selling are often left feeling shame and embarrassment — and sometimes end up in financial trouble.
Scammers can pose as legitimate financial advisers, many using fake qualifications on social media, while others strike up friendships based on shared interests. According to the New Zealand Financial Markets Authority, one woman in the country lost NZ$100,000 ($59,000) in a crypto scam pushed by someone she met playing online scrabble.
Fraudsters often exploit social media algorithms to amplify their activities, targeting different audiences across multiple countries. With little platform enforcement, these schemes can thrive unchecked.
What to look out for
Urgency If there is a sense of scarcity or pressure to act fast, this is often a marketing tactic.
Guaranteed returns If something looks too good to be true, then it probably is. Watch out for anything advertised as low risk high return, or anything vague about risks.
False identities People are now displaying fake qualifications on LinkedIn. There has been a rise in accounts being hacked and deep fakes are becoming more realistic. Always check and verify who is selling to you before you act.
Influencer tactics Just because someone relatable or famous says it, it doesn’t mean it’s safe or true. There are lots of cases where the influencer doesn’t even know themselves whether what they’re promoting is legitimate.
Influencers
Charlotte Hooper, chief operations officer at UK-based non-profit The Cyber Helpline, describes scammers and influencers as “expert marketeers”, both having agendas to get those watching to take a certain action: try, click, follow, buy.
These days, lots of influencers are pushing financial information but it is worth asking yourself who they are, whether they know anything about money and what their incentives are.
According to data provider Statista, the influencer marketing market will be worth around $30bn globally this year. Businesses are increasingly teaming up with creators to push agendas through their social media platforms.
One of the main concerns is paid promotions, where the prospect of a big payday may cause creators to overlook the need to scrutinise the products they are promoting. Many still fail to disclose that they are advertising a product or service.
Companies are not always held responsible for the accuracy of content they supply to creators, while content creators themselves may not be subject to the same strict regulations as the financial industries they are promoting.
A recent UK study by academics at universities in Newcastle and Birmingham about “finfluencers” (financial influencers) on TikTok found that while they have helped democratise financial advice, especially for younger users, a lot of their content is focused on high-risk areas like cryptocurrencies and foreign exchange trading. Many of these posts blur the lines between education and promotion.
The UK’s Financial Conduct Authority — a regulator whose job it is to ensure that consumers are treated fairly — has cracked down on finfluencers giving bad advice on social media in the past three years, as a part of a new set of rules called the Financial Promotions Regime.
Last year, it brought charges against nine influencers and reality TV stars over their involvement in promoting a high risk financial scheme.
The platforms
Of course, the influencers would not have an audience without the platforms where their content appears.
The FCA says that when it comes to harmful content, “tech firms should up their game by proactively identifying and removing” it.
Under the UK’s Online Safety Act, platforms have a duty to prevent individuals from seeing illegal promotions. But Arun Chauhan, trustee of the Fraud Advisory Panel, a charity, warns that “it’s going to take a long time to have teeth”.
He suggests that platforms could introduce a verification system for anyone involved in paid financial content, to ensure they are who they say they are and are qualified to deliver that information.
Nikita Nathwani is the social media manager at FT Flic, a Financial Times-backed charity promoting financial literacy around the world. Find out more at ftflic.com
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