Investors fall out of love with finfluencers and increasingly turn to traditional financial advice

An increasing number of retail investors are moving away from social media ‘finfluencers’ as a source of investment advice and instead returning to more traditional channels, data claims.

So-called ‘finfluencers’, social media influencers who specialize in financial advice, have gained popularity on platforms such as Tiktok, Instagram, Twitter and Youtube in recent years, having seen a boost during the Covid pandemic as more people developed an interest in investing.

However, since 2021, the influence of these social media figures has declined, falling 13 percent among Generation Z.

Now only 37 percent of adults ages 27 and younger turn to finfluencers for advice, according to research from investment platform Charles Schwab.

Millennials, those between 28 and 43, have also begun to move away from them as a source of financial advice, with 42 percent still turning to these personalities, up from 52 percent previously.

Should you hire a financial advisor?

It’s no surprise that finfluencers have managed to make their way into the financial guidance sector, with free advice that stands in stark contrast to the fees of financial advisors.

For small-scale investors, it can be difficult to justify paying significant amounts for financial advice.

But that advice can be valuable, as a whopping 87 percent of investors admit they don’t have enough financial knowledge to manage their portfolio effectively.

Karen Barrett, founder and chief executive of financial comparison site Unbiased, said: “If you are considering investing, it is worth seeking guidance from a qualified financial adviser.”

“They can help you build an investment portfolio that aligns with your risk appetite and long-term goals, as well as review it regularly so you can increase your chances of generating the returns you want.”

According to Charles Schwab, up to 81 percent of retail investors in the UK believe it is increasingly important to consult financial experts when it comes to their investment strategies.

Too good to be true: Karen Barrett warns that finfluencers are not qualified to give financial advice

Some 58 percent of these investors already seek advice from professional financial advisors, an increase of seven percent on last year, while the number of people turning to the financial press for information also increased by seven percent, up to 52 percent.

Richard Flynn, UK managing director of Charles Schwab, said: ‘The current macroeconomic climate continues to shape the attitudes and behaviors of retail investors in the UK. Since we began this study at the end of 2021, domestic and international markets have experienced varying levels of volatility and uncertainty.

“It is therefore reassuring to see a growing (and notable) number of investors proactively seeking professional advice to get the most out of their investments.”

While some of what finfluencers promote is undoubtedly good advice, it is wise for people not to put too much stock in what they suggest or the investments they promote.

The lack of regulation and qualifications needed to be an influencer means there is little to stop bad actors from misleading viewers.

Barrett told This is Money: ‘While finfluencers can offer useful general money advice, it’s worth emphasizing that they don’t need qualifications to be one.

“As the Financial Conduct Authority has begun to crack down on misleading ads by finfluencers, including recently updating its guidelines, more people are likely to question its decision to take its advice at face value.”

He added: “This is a wise decision by the FCA as it aims to help protect people from inappropriate advice which could be harmful and cost them money.”

Along with finfluencers, there has also been a decline in the popularity of celebrity influencers promoting financial products and investments, with only 32 percent of Millennials following this advice, down from 51 percent a year ago.

Meanwhile, the number of Gen Z followers has fallen to 35 percent, from 45 percent previously.

In 2022, Kim Kardashian agreed to pay more than £1 million in a settlement of charges from the US Securities and Exchange Commission over an Instagram post she made promoting EthereumMax.

Similarly, footballer Cristiano Ronaldo is currently being sued for over $1 billion after promoting Binance NFTs on Instagram in a way that a class action lawsuit filed in the US says was “deceptive and unlawful.” “.