How influencers could ruin you: everything you need to know

It's incredible to think how today's young people turn to social media for financial advice, where appearance often outweighs substance. Fin-influencers, with their luxury watches and promises of instant wealth, seem to have the magic formula for success. But who really controls their advice? The world of fin-influencers is a jungle where it's easy to fall into the trap of illusion and, worse still, risk losing your savings.

But how can we protect ourselves?

1. Who are influencers and why are they so popular?

Finfluencers are those social media personalities with throngs of followers on platforms like TikTok, Instagram, and YouTube who offer investment advice. Their popularity has exploded, especially among Gen Z, who are increasingly seeking information online. According to a Barclays survey, four in ten young people get financial information from finfluencers. Have you ever wondered why? The answer is simple: the promise of a dream lifestyle and easy earnings is truly irresistible. However, behind these glittering promises lies a sea of risks and uncertainties.

An analysis conducted by the Swiss Finance Institute revealed that most finfluencers lack the necessary skills; in fact, many of them perform poorly. Only 28% of finfluencers analyzed were considered "skilled," while a full 56% were labeled "unskilled." Imagine following someone who not only doesn't know what they're recommending, but could also cause you to lose money! It's an alarming situation, especially considering that young people, often without the proper training, are vulnerable and at risk of falling into financial traps.

2. The hidden risks of online financial advice

One of the main problems is the lack of regulation. Unlike traditional financial institutions, influencers aren't subject to the same rigorous regulations. This can lead to disastrous consequences for consumers. Rachel Blake, a Labour MP, emphasized that receiving advice from an influencer is very different from receiving it from a certified financial advisor. Would you trust advice without any guarantee of validity or security?

Furthermore, unauthorized communication of financial promotions can result in severe penalties. In the UK, those promoting financial products or services without authorization can face up to two years in prison and unlimited fines. This makes the situation even more worrying, considering that many fininfluencers operate without any supervision.

3. What are the authorities doing to protect consumers?

British authorities, such as the Financial Conduct Authority (FCA), are trying to address the problem of influencers. They recently launched international initiatives to protect social media users from illegal financial promotions. However, the FCA must rely on large tech companies to remove problematic content, which is far from simple. It can take weeks to remove a post, by which time the damage may already be done.

The FCA has launched investigations into various influencers and has already taken action against some of them, but their fight is complicated by the global nature of many of these influencers. The lack of clear jurisdiction makes it difficult to prosecute those responsible. While there have been successes, such as celebrities being fined for misleading promotions, there is still a long way to go.

In a world increasingly dominated by social media, it's crucial for young people to learn to distinguish between valid advice and scams. Proper communication and financial education are essential to protecting their savings. Remember: if something seems too good to be true, it probably is! Share this article to help raise awareness among your friends about the risks of finfluencers! 💡✨