‘Finfluencers’: Financial Education And Regulator Surveillance

    ‘Finfluencers’: Financial Education And Regulator Surveillance
    ‘Finfluencers’: Financial Education And Regulator Surveillance

    Social networks are experiencing an outburst of influencers generating content on financial topics. More than previous generations, millennials (those born between the early 1980s and the late 1990s) and centennials (those born starting in the late 1990s) appreciate when this type of information comes from someone like themselves.

    But regulators that have started to monitor their activity recommend taking precautions before following their advice and warn of the risks of turning investing into “a videogame.”

    The desire to take control of their finances has skyrocketed among millennial and centennial generations (or generation Z) due to two factors, according to Finder.com: the economic crisis caused by COVID-19 and the rise of new investment and trading apps that make it easier than ever to get started in this world.

    Perhaps for these reasons, discussing finance is now in style in social networks: at the end of September 2021, the hashtag #FinTok on TikTok had over 500 million views;  #cryptocurrency had over two billion views, and #investing over 3.7 billion. On Instagram, #financialfreedom appears in more than 10 million posts and #investing in nearly 12 million.

    These and many other hashtags are used by ‘finfluencers’, people who make all kinds of financial information go viral – from investment strategies, how to manage personal finances, analysis of the latest cryptocurrency and shares on the rise, to products like mutual funds, digital platforms to take your first steps as an investor, and how to create an ecommerce business. In some cases, it is educational content that explains technical terms in an easy-to-understand manner, for example, or in-depth analytical explanations. Others focus on sharing their own experiences, such as gains and losses in the stock market or personal tricks to save and earn money on a small scale.

    The value of a voice like theirs

    The topics that ‘finfluencers’ cover are as diverse are their origin. In this pond of ‘likes’ and views, self-taught investors with more or less experience in the markets coexist, but so do students taking their first steps in managing their finances, and their hundreds of thousands of subscribers are looking to listen to voices like theirs.

    Some feel that ‘finfluencers’ are filling a void in financial education

    Knowing what information to trust is precisely one of the biggest concerns of those interested in starting to have greater control over their economy, but who do not yet have enough financial education. Research from the group of experts, Common Vision, reports that millennials point to a need for financial information that addresses their generation’s specific concerns. They do not trust the information available in specialized digital media, or find it to be insufficient or confusing (according to PwC, this generation has less financial knowledge than previous generations).

    Some feel that given that commercial news channels tend to be limited to offering market updates, ‘finfluencers’ are filling a void in financial education.

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    The figures show that searches are on the rise for useful and simple information on social networks and online communities. 71 percent of centennials and millennials appreciate financial information coming from someone like themselves, compared to 48 percent of the Baby Boomer generation (those born in the 1950s and 1960s), New Morning Consult reports.

    In addition, another survey published by the financial advice firm MagnifyMoney Advisor in January 2021, found that nearly 60 percent of investors under the age of 40 belong to investment communities or forums, and 46 percent had turned to social networks for information on investments in the previous month (by order of preference to YouTube, TikTok, Instagram, Twitter, Facebook groups and Reddit).

    ‘Finfluencers’ profit from these visits to their digital profiles, either by monetizing views of their channels, selling investment courses through sponsorships or by introducing promotional content. The transparency problems start when they do not indicate the risks associated with the products and strategies they mention, or when promotional content is not properly described as such. And it gets worse when their followers, due to a lack of financial education, do not understand the complexities in the markets and are not aware of the risks associated with the information they receive on social networks.

    Many of those creating YouTube content add a disclaimer to each video, warning that the information they provide and their opinions are educational in nature and should not be interpreted as investment advice, so they are not responsible if it is used inappropriately.  Others put this disclaimer in more obscure places like the channel description page, where their followers barely see it. And on social networks like TikTok and Instagram, they disappear nearly completely, although the network itself adds a warning message on the general page for hashtags that it has identified as sensitive.

    It is also important not to forget how social network algorithms work, recommending content similar to what the user is currently viewing.  In this case, a user could start by viewing educational content with accurate, proven information that weighs the benefits and risks, but end up with other, less credible content that hides hidden interests, or are actual scams.

    Regulators react

    For these reasons, regulators are paying close attention to this content. In Spain, Rodrigo Buenaventura, chair of Spain’s financial market regulator, the CNMV, has called on influencers and public figures to act responsibly to prevent “investors from falling into offers that could be erroneous or even fraudulent.”