The US-based FINRA Foundation points to an equally stark generational divide. Among investors aged 18 to 34, 60% used social media to inform their investment decisions, and slightly more, 61%, followed finfluencers. Among investors aged 55 and older, the figures were just 9% and 6%.
Selling Trust Before Selling a Product
Compared with traditional advertising, a finfluencer holds a significant advantage: followers rarely feel like they are watching an advertisement. They may follow a creator for months, come to know their lifestyle and receive free advice on saving or investing along the way. Trust builds gradually. Only then does a specific product, broker, cryptocurrency, course, paid community or registration link enter the picture.
The National Bank of Slovakia warned about this phenomenon as early as last year. According to the bank, many finfluencers present themselves as financial experts despite lacking the necessary expertise, and their advice can be incorrect or misleading. The regulator urges people to verify the credentials of anyone providing investment advice, and treats pressure to invest immediately as a red flag.
Social media's influence extends well beyond investing advice. It also shapes what young people consider a marker of financial success, constantly surrounding them with images of travel, gadgets, cars and clothing. Simplea, a financial advisory and services company, points to the example of a smartphone priced at €1,400 ($1,630), compared with an older model costing roughly half as much. According to Simplea director Jozef Bardy, that price difference amounts to a "status cost", money that could just as easily have been set aside as savings or invested instead.
Bardy also sees a fundamental difference between a finfluencer and a regulated professional when it comes to accountability. "No one is held accountable for advice given in a video – if it goes wrong, the loss is borne solely by the person who followed it", he points out.
When Your Followers Are the Exit Strategy
Conflicts of interest reach their worst when followers unwittingly help an influencer make money. In 2022, the US Securities and Exchange Commission (SEC) charged eight people in a case involving alleged stock manipulation worth approximately $100m.
According to the commission, seven of the accused had built up hundreds of thousands of followers on Twitter and Discord. They would first buy certain stocks, then promote them to their audience and publish price targets. Once their followers' interest had driven up the price or trading volume, they sold their own positions, without ever disclosing that they were doing so.
A follower convinced that they were copying a successful investor could thus end up being the very person to whom the influencer was quietly selling.
A similar dynamic, taken to a fraudulent extreme, is evident in the case of the American Kenneth Thom, who marketed himself as a successful trader and self-styled "Wall Street veteran", despite having had his broker registration suspended as early as 2011. According to the US Department of Justice, he raised nearly $800,000 from around 66 clients. Of this, he invested about $350,000 and spent much of the remainder on travel, dining and luxury goods. He lost approximately 73% of the amount invested, all the while showing his followers fabricated results boasting significant profits. This year, he pleaded guilty to investment fraud, and on 11 August a court sentenced him to two years in prison.
The Many Ways Trust Can Be Sold
Another model is exemplified by Australian finfluencer Tyson Scholz, known as ASX Wolf. He built a paid community around stock trading, but a court found that he had been providing financial services without the necessary license.
The Australian regulator subsequently secured a permanent court injunction against him. It noted that people who paid for access to his forums, or bought shares based on his recommendations, did not enjoy the protections afforded to clients of licensed entities.
A financial product, however, does not need to be promoted by someone who built their audience through investing in the first place. In 2022, the British advertising regulator took up the case of Jessica and Eve Gale, influencers from the reality show Love Island, who had promoted cryptocurrency-related services on Instagram. According to a ruling by the Advertising Standards Authority, the sisters were given a prepared script and later claimed they had not been aware of the risks involved in such promotion. The regulator also found the advertisement problematic, since it failed to adequately communicate the investment risks.
A finfluencer's power extends beyond selling a product. It can also move a crowd to panic. Singapore offered an illustration of this last year, when finfluencer Seth Wee posted a video explaining why he was withdrawing his money from the Chocolate Finance platform. The following day, the platform temporarily suspended instant withdrawals, citing high demand. The company later said the surge in withdrawals had been partly driven by social media, according to Channel News Asia. Wee subsequently apologized for causing any unnecessary concern. A finfluencer, it seems, can persuade a crowd not only to buy, but also to walk away.
No Disclaimer Can Undo Bad Advice
The phrase "this is not investment advice" appears frequently in investment content. It does not, however, automatically protect its author.
In a guide for finfluencers, the European Securities and Markets Authority (ESMA) warns that personalized recommendations on what to buy, sell or hold may constitute investment advice requiring authorization. In certain circumstances, even a public endorsement of a specific investment strategy can fall under these rules.
ESMA's guidance also warns followers to watch for hidden sponsorships. If a post is paid or the poster benefits in some way, this should be stated clearly, not buried in hashtags or fine print. Extra caution is warranted around high-risk products such as cryptocurrencies, forex trading and contracts for difference, especially when a post promises quick riches. Genuine investment advice does not need to create urgency or pressure to act fast.
The regulator also points out that having a large following does not make someone a financial expert. Influencers are not required to hold any formal qualifications to post about money, but that also means their advice may not be as informed as it appears. ESMA's message to followers is simple: confident delivery is not the same as sound advice.
A Double-Edged Algorithm
It would be too simplistic to dismiss finfluencers as modern-day charlatans. Social media can bring topics such as investing, inflation, ETFs and financial reserves to people who would otherwise never think to visit a central bank's website.
The Slovak National Bank confirmed to Statement that it monitors finfluencers' activity and proactively alerts content creators to posts that may fall under the Market Abuse Regulation or the Securities Act. It is unable, however, to quantify how many Slovaks have lost money by following their advice.
"Complaint records are not maintained in a way that would allow us to quantify cases based on whether a consumer's decision was guided by the recommendation of an influencer or a finfluencer", spokesperson Peter Majer explained to Statement. The central bank nonetheless regards young people as a particularly vulnerable group, and counts deepfake content among the risks it is watching.
Finfluencers are unlikely to disappear. They can explain a complex topic in a minute, speak the language of their audience and, in place of anonymous advertising, offer the face of someone their followers can check in with every day. This has produced a generation of financial influencers whose credibility rests largely on algorithms, follower counts and the ability to hold attention.
Anyone curious about investing who opens Instagram or TikTok will need to answer a question that may matter more than any single investment decision: is this person advising me because it is good for my money, or because my decision makes money for them?
