A new study raises concern about the credibility of financial advice being offered on social media by so-called “finfluencers”, Financial Advisor reported.
Fintech licensing consultancy Legalaes found that only 2.2% of these financial-advice content creators have relevant credentials that make them qualified to give financial advice. Such credentials include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), and more.
This means, the report said, that 97.8% of the finfluencers sampled may be unqualified to talk about investment and finance.
Legalaes sampled 1,764 finance-related Instagram and Facebook reels, TikTok videos, and YouTube shorts and learned that they have a combined total of more than 690 million views, but added that 29% of these videos are misleading.
YouTube has the highest share of those, with 41.8% of YouTube videos deemed misleading.
Misleading videos get more engagement (555,547 average views per video) than non-misleading videos (326,170 average views per video).
“This is alarming because finance and investment content have a direct impact on a person’s financial stability,” the report said. “Viewers are watching, reacting, and frequently acting on the advice offered, which is concerning because the data show nearly three in 10 of these videos are misleading.”
Only 11.7% of the videos that were examined in the study have disclaimers or display them on the finfluencers’ profiles.
A video was rated potentially damaging for high-harm advice, inaccurate for unreliable claims, and accurate for advice grounded in established investment principles. It was labeled misleading for promoting a paid product or service, suggesting specific returns or investment amounts, guarantees returns, or provides inaccurate or damaging advice.
A video could register as both accurate and misleading at once, the report noted, when a clip delivered sound advice but paired it with a risk signal such as a promoted product or a guaranteed-return claim.
Trading Tips and Technical Analysis has the highest share of misleading videos, with 40.6% of videos in this category identified as misleading. Legalaes found many videos failed to disclose conflicts of interest, while at the same time promoting paid products and services.
“Much financial content on social media seems to have been created to induce retail investors into acting, without full transparency on possible adverse consequences, to draw customers into marketing funnels to generate leads and sales,” the report said.
The researchers emphasized that there is plenty of financial content on social media platforms, but investors following this advice could put their money at risk. Retail investors were urged to be cautious when consuming financial and investment advice on social media.
One tip was to check the content creator’s qualifications. Most regulations require investment advisors to have appropriate and relevant credentials through consumer-protective frameworks such as the Securities and Exchange Commission, the Financial Conduct Authority,(FCA) and other investment regulatory authorities.
Investors were also advised to scrutinize the content for misleading information and look for disclaimers. For example, the FCA requires clear, fair and not misleading financial promotions.
Another note of caution was to be on the lookout for potential conflicts of interest, especially when the content creator is selling a product or a service. The Securities Act has a commercial intent disclosure requirement.
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