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3 reasons why you shouldn’t take financial advice from social media

Category: News

A 2021 study from Finder revealed that 51% of UK investors turned to social media for investment advice. The amount of misinformation online, though, means that this may not be the best strategy.

Indeed, the Guardian recently reported that the Financial Conduct Authority (FCA) forced companies to remove or amend more than 8,500 financial promotions from social media in 2022 because they were deemed misleading. The figure is 14 times higher than the previous year.

“Finfluencers” – social media influencers who advise on financial matters – often present themselves as experts, but that may not be the case.

Here are three reasons why you should avoid taking financial advice from social media and consider working with an experienced financial planner instead.

1. “Finfluencers” may give unregulated advice

Fingerprint Financial Planning is regulated by the FCA. You know you’ll receive reliable advice from our expert, and ethically-minded, financial planners.

This gives you peace of mind knowing that your financial planner will be held accountable if they are not acting in your best interests and that you are protected.

However, when you take advice on social media, you don’t have this protection. Anybody can create an online profile and start giving financial “advice”. While the FCA are trying to manage the issue, it is down to the social media platforms themselves to regulate misinformation, and this is notoriously difficult.

Ultimately, this means you could be taking advice from somebody with very little knowledge of the financial world, and you will likely have no recourse if poor advice damages your wealth.

2. Social media is filled with financial scams

Financial scams have been around since the advent of money and social media is simply the latest weapon that scammers wield. 

Action Fraud report that victims lost a total of £63 million to social media investment scams in 2021.

These come in many forms. “Pump and dump” schemes spread misleading information to encourage people to buy a stock and artificially inflate the price, for example, and this could be the driving force behind a social media investment tip you read.

Ponzi schemes, where money from new investors is used to pay older investors and give the impression of positive returns, are also very common.

The reality is that most of us could fall victim to these scams, even if we are already aware of them. That’s because scammers are adept at making themselves look legitimate. It could be near-impossible to tell the difference between a genuine opportunity and a scam. 

In contrast, an experienced financial planner will do due diligence on any investment before recommending it, so the chances of falling victim to a scam will be much lower.

3. You can be encouraged to chase trends

In January 2021, a group of investors on the social media platform Reddit encouraged users to buy into the video game retailer GameStop. The result was a significant spike in the value of the company and huge losses for Wall Street investors who were shorting the stock.

Forums lit up with stories of investors who had sold during the peak and made life-changing sums of money. But those that jumped on the bandwagon and invested significant sums into GameStop too late lost considerable sums.

Don’t be drawn into chasing these trends and remember that if something appears too good to be true, it often is. 

It’s also important to remember that your financial plan is unique to you, so you’ll want to consider your own life goals and attitude to risk when choosing your investments.

Aligning your investments with your goals – rather than simply following the latest social media trend – is the best way to achieve those goals while taking the smallest possible amount of risk.

This is one reason why it is generally better to work with a professional financial planner. At Fingerprint, we take the time to get to know you and understand your circumstances, aligning your personalised investment strategy to your medium- and long-term goals.

Get in touch

We can give you all the assistance you need with investments and other aspects of your financial plan, so there is no need to follow potentially risky social media advice. 

Get in touch by emailing or calling 03452 100 100

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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