Financial influencers: How to make sense of it all
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Do you gather most of your financial information from social media sites? Are you tempted by the investments offered by certain influencers? Here’s what you need to know to avoid the worst.
When it comes to financial matters, social media are an increasingly popular source of information, especially among young people. In 2022, RBC revealed the results of a survey showing that a quarter of 18- to 24-year-olds find their financial information on TikTok and Instagram or from articles published online. The following year, it unveiled another survey in which 40% of participants aged 13 to 17 said they were “learning about money” from at least one social media platform (YouTube and TikTok were the most popular). In the U.S., these sites are even more popular. According to a survey commissioned by Forbes Advisor and conducted by Prolific in January 2023, 79% of people aged 18 to 41 said they get financial advice from such sites.
These people aren’t always ill-informed, quite the contrary. “On social media, there are influencers who have no training whatsoever, report on their personal experience and offer risky products,” says Clarisse N’Kaa, an analyst at Option consommateurs, who’s currently working on a report about “finfluencers,” another word for financial influencers. “But there are also influencers who have a solid financial background as well as duly certified professionals who give relevant advice and offer their services.”
Discerning the good from the not-so-good
How do you spot the ones with questionable practices? “When all the focus is on the visual aspect, you should be skeptical,” says Fabien Major, a financial planner and wealth management advisor at iA Private Wealth. According to him, the same applies when a site is full of questions that can only be answered by purchasing a training course or book for a relatively large sum or when you’re faced with a series of insistent solicitations.
That said, just because an influencer has nothing to sell doesn’t mean that he or she isn’t taking advantage of your presence to make money. After all, some are paid to promote products. When this is the case, they must indicate it by using disclosures such as “#ad” or “#sponsored,” as prescribed by Ad Standards. It should be noted that the organization has published guidelines for influencers, and the Competition Bureau has also published information to help influencers improve their behaviour. “These disclosures, which are not always present or placed in such a way as to be clearly visible, are generally not well understood by consumers,” says Clarisse N’Kaa.
Solid reputations are earned
According to Fabien Major, we also need to be aware of those who sing their own praises, whether such a glowing reputation is real or imagined. “The fact that a person would consider themselves famous is cause for suspicion,” he mentions. “It’s up to the public to determine that, and they’ll only do so if they feel the influencer has had a positive influence on them.” Major adds that fame isn’t acquired overnight, but is built up slowly, over time.
Another factor that could set off alarm bells is when an influencer disparages traditional investment and regulatory authorities and directs internet users toward risky investments such as cryptocurrencies and tech start-ups. This may sound like a no-brainer, yet many consumers are getting duped. “Some influencers know how to skirt the rules and have a certain talent for the art of persuasion,” warns Fabien Major. “This should not be overlooked.” It should be kept in mind that the greater the promised return, the greater the risks.
Knowing the client
Finally, you should also be wary of those who offer a product to a person without first getting information about that person. In financial matters, advice is particularly important. “A professional will be interested in a client’s situation and have them fill out an investor profile,” says Major. “It’s important for the client to do this because each person has their own specific situation, which must be taken into account by the financial advisor so that the right products can be offered.The advisor also needs to set a certain timeframe to reduce risk.”
It's worth noting that financial advisors must respect their obligations, which are set out in black and white in the Code of Ethics of the CSF. Moreover, to practise in Quebec, they must hold a permit from the Autorité des marchés financiers (AMF). To check whether this is the case for the person you wish to consult, refer to the Register of firms and individuals authorized to practice, which can be found on the AMF website.
References
This article was prepared for the Partner section of Protégez-vous magazine (in French).
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