With so much financial doom and gloom around, it's no wonder that so many are looking for easy ways to find that pot of gold at the end of the rainbow — and social media is chockablock with financial influencers promising they know where to find it!
But with an increasing numbers of young people falling victim to scams, the Financial Conduct Authority (FCA) has begun a crack down on social media influencers who use their platform to promote financial products and services illegally. 'Finfluencers' are not FCA authorised or qualified to give financial or investment advice. Currently 20 are being interviewed under caution for touting unauthorised trading schemes and the FCA has issued an additional 38 alerts against social media accounts operated by finfluencers which may contain unlawful promotions.
Nearly two-thirds (62%) of 18 to 29-year olds follow social media influencers; 74% of those said they trusted their advice and 9 in 10 of these followers have been encouraged to change their financial behaviour as a result of what they are seeing and reading. Steve Smart, joint executive director of enforcement and market oversight at the FCA, says: "Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt."
But it's not just Gen Z that are vulnerable to dodgy advice — research shows one in five people between the ages of 45 and 54 are more likely to get financial information from social media since the cost of living crisis began*.
Understanding your finances can be intimidating, and social media can help to make it more accessible, but it's important to make sure you're getting your information from reliable sources.
"The risk with finfluencers is that anyone can set themselves up as one," says Sarah Coles, personal finance analyst at Hargreaves Lansdown. "You don’t need any skills or experience, you can just launch yourself into telling people what to do with their money. In fact, ironically, the fact they’re unregulated means they don’t have to follow the regulator’s rules about what they can publish, so they can say what they like."
"It’s no secret that personal finance content on social media has exploded in popularity, with millions turning to platforms like TikTok, Instagram and Facebook for guidance, with mixed results," says Lily Megson, policy director, My Pension Expert. "At its best, this content can serve as an engaging and accessible way to get an informative overview of certain fiscal concepts. But at worst, it can be ill-suited to the financial situations of those consuming it – or even just wildly inaccurate – leading people to poor financial decision-making.
"People’s financial circumstances vary so hugely that guidance given on video viewed by hundreds of thousands just cannot reliably meet the needs of all watching. Take pension planning, for example. The financial priorities and therefore the retirement savings approach of a 55-year-old mortgage-free homeowner differ significantly from that of a 30-year-old new parent struggling with debt," says Lily.
Financial fact or fiction?
To help you separate fact from fiction, we asked three experts for their thoughts on some of the most common money tips that are given on social media. Here's what they said.
Budgeting: what is 'cash stuffing'?
The cost of filling our fridges and heating our homes is incredibly high at the moment, so creating a budget and sticking to it can help you to plan out how you'll cover your bills and other expenses. One popular method of budgeting that's often recommended on social media is 'cash stuffing' — but what is it, and does it work?
Sarah Coles explains: "Cash stuffing is where you withdraw your salary on pay day and put it into pretty drawers or some sort of filing system, with a specific amount to spend on each part of your budget. For example, one drawer could be for groceries, another for transport and one for leisure.
"The idea is that it helps you to know how much money you have left — and cuts the risk of overspending. This kind of budgeting can be incredibly useful, but having an entire month's salary sitting around the house is a really dangerous idea. It would be far better to do this through your current account or a budgeting app instead."
Investing: should I invest in cryptocurrency?
One form of making money that's touted a lot on social media are cryptocurrencies. These are digital currencies that saw a surge in popularity during the pandemic, with Bitcoin being the most well-known. Many celebrities have advertised cryptocurrency over the last few years, with Kim Kardashian having to pay a £1.12m fine in October 2022 for failing to disclose that she had been paid for endorsing a currency called EthereumMax.
Like any investment, the value of cryptocurrencies can fluctuate with some headline-hitting highs but also some terrible lows since the inception of digital assets. But if we look at Bitcoin, the original cryptocurrency, 2024 has been a year of highs rather than lows with the price steadily rising over the course of the year. Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners advises careful consideration before you think of investing.
"The rollout of spot Bitcoin exchange-traded funds in the US at the start of the year boosted accessibility and convenience for investors that want some exposure to the digital asset in their portfolio. Add in optimism about around a more favourable global regulatory environment for crypto and it’s understandable why more people might consider investing.
"In the UK, however, regulations are tighter under the Financial Conduct Authority. While the FCA has approved cryptocurrency Exchange Traded Products to list on the London Stock Exchange, these are only open to professional investors. For now crypto is still considered a risky investment, which is why the FCA insists on clear risk warnings around the sale of crypto to ensure investors understand what they are buying into.
“For now crypto remains a hugely volatile market with the price often extremely unpredictable and they are still unregulated assets that are not covered under the Financial Services Compensation Scheme,” Alice says. This is a scheme that provides protects customers and investors by providing compensation if a company fails.
“If you buy an unregulated asset, it means you are effectively on your own if anything goes wrong. You only have to look back at the fallout from the collapse of crypto exchange FT in 2022X, with clients unable to withdraw their funds, to see the risks involved,” she says.
If you do decide to invest in cryptocurrency, Alice advises making it part of a diverse portfolio. She says,“Only allocate a tiny proportion of your investment portfolio to this asset class — ideally an amount you can afford to lose — with the rest directed towards regulated mainstream investments, such as equity and bond funds or investment trusts where you have some redress if things go horribly wrong.”
Debt: who can I trust for debt advice?
Credit card debt is up around 8% from 2022**, and more advertisements from organisations promising to help 'write off your debt' have been popping up on social media feeds and search engines. However, many of these organisations are not regulated by the FCA and some charge for the advice they offer, often despite it initially appearing to be free.
"There are organisations which use branding and imagery designed to mimic more reputable debt firms, while in reality they are working for fee-charging providers of products like individual voluntary arrangements (IVAs)," says Sue Anderson, former head of media at StepChange.
An IVA is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time and the fees charged for them are high. "Although IVAs can be a good product in the right circumstances, they aren't right for everyone, and these unregulated organisations can drive people into 'set-up-to-fail' debt plans which can make them thousands of pounds worse off than they started."
These adverts often use branding and colours that look similar to reputable debt charities like StepChange or Citizens Advice. In January 2022, a company called WiseoldMary placed adverts on Facebook promising to write off debt and using a logo similar to the government crest. This advert was banned by the Advertising Standards Authority because it did not make it clear that they passed on leads to a third party and did not clearly state the potential fees and risks.
"These imitators are steering people away from the comprehensive, impartial debt advice they’re seeking and towards profit-making firms motivated by commission," says Sue. "If you’re unsure of where to get help, make sure any debt advice organisation you go to is free and is regulated by the FCA."
How to find trusted financial advice
One thing to remember is that just because a post on social media has high engagement, it doesn't mean that it's from a trusted source.
"Part of the problem is that when you see someone has a lot of views and likes, it’s easy to assume they must be experts," says Sarah Coles. "In reality, it just means they’ve made a video that has entertained people – it tells you nothing about the tips and advice itself."
If you are unsure whether to trust the advice you have read, speak to someone from a recognised organisation such as Citizens Advice, StepChange or MoneyHelper. Don’t be afraid to ask for a financial experts for their qualifications, which should include:
- Have a Level 4 or above of the Qualifications and Credit Framework;
- Have a Statement of Professional Standing (SPS), meaning that they have signed up to a code of ethics and completed 35 hours of professional training a year;
- Be FCA approved, which you can check here. The same goes for organisations, so make sure you check the register before following any financial advice.
A financial expert will not hide their qualifications — you should be able to find them listed on their website or in their social media bio.
If you are looking for a financial advisor, recommendation is always a good first port of all. Otherwise, to find a qualified independent financial advisor near you, check out Unbiased and Vouchedfor.
*Westfield
