How Social Media Personalities are Shaping the Future of Financial Promotions

It would be easy to assume that platforms like Instagram and TikTok are the last places that most of us would look to seek personal financial advice. A quick search through the hashtag #FinTock, however, and you will find everything from budgeting and energy-saving tips, to shopping around for the best deals on car/home insurance, saving for retirement, or even a basic introduction to the investment market. All of these are promoted by financial influencers or “finfluencers” through short, fast-paced videos designed to get information across as quickly as possible and reach a wide range of audiences.

In essence, it is visual media fast food; the consumer gets a summary of complex subjects in a bite-sized format without having to dedicate time and concentration to researching through multiple sources - that is if you can sit through multiple videos of exaggerated acting, pop culture references and Gen Z-targeted humour to get that information.

Admittedly, the format might not be to everyone’s taste, but you cannot argue social media’s influential effect on younger audiences. Since the pandemic and the increase in the cost of living, there has been a rise in the number of young consumers who are turning to social media for financial advice more than they would from schools or family members. Reportedly 58% of young adults say that “hype” on social media and in the news is an underlying factor in their investment decisions.  

It is a growing trend in the financial services industry in recent years and one that has certainly caught the attention of the FCA. With the Consumer Duty now in full force, it makes sense that the FCA is scrutinising how these products and services are being promoted and whether the significant increase in social media influencers poses a potential risk for consumer harm.

Last month, we mentioned that the FCA is currently consulting on its guidance for financial promotions on social media and is welcoming responses for the consultation up until 11 September 2023. Subject to the responses received, the finalised guidance will be published towards the end of 2023.

Back in April this year, the FCA teamed up with the Advertising Standards Authority to raise awareness of the risks involved in promoting financial products. This work included an infographic, roundtable discussions and live events to educate consumers and influencers about the harm that can take place.

Most finfluencers offer well-informed guidance and aim to educate their group of followers about potential financial risks prior to committing to any major decisions. As a result, this can have a positive effect on improving the financial literacy of young investors who are new to the industry.

Nevertheless, there is a small minority that are potentially spreading misleading information, promoting products and investments without the understanding of the harm it could cause to followers who are enticed into ‘getting rich quick’ as their favourite personalities pose in luxury cars and mansions (usually not their own).

The FCA has warned previously that any “unauthorised persons”, including social media influencers, who promote regulated financial products or services without the approval of an FCA-authorised person may be committing a criminal offence. Any firms that do use influencers to communicate their promotions on social media will also need to take appropriate steps to ensure that “any such influencer understands the product or service they are promoting and is aware of the relevant rules.”