As market volatility persists and speculation mounts over the potential phasing out of ISAs, more and more people are looking for new ways to protect their savings. However, how people seek financial advice today has changed significantly, with only 9% of UK adults seeking financial advice from a professional last year. Traditional financial advisers are no longer the sole gatekeepers of financial wisdom. Instead, ‘finfluencers’ – social media influencers who are reshaping how people manage their money – are becoming a go-to source of financial guidance for many. But who are these finfluencers, and what regulations govern their activities?

Finfluencers – lures and risks

Finfluencers, short for financial influencers, are social media personalities who use platforms like TikTok, Instagram and YouTube to share financial advice, promote financial products and break down complex topics like investing, budgeting and wealth-building into digestible content. Finfluencers are not always FCA authorised, and often link their own personal stories of success to their financial advice, raising important questions about the credibility of this advice.

Despite these concerns, the accessibility of finfluencer content is making them increasingly popular. According to the FCA, almost two-thirds (62%) of 18 to 29-year-olds are following finfluencers. 74% of those followers trust the advice given by these influencers, and nine out of 10 young followers have been encouraged to change their financial behaviour based on this advice.

For many, especially younger audiences, traditional financial institutions can seem intimidating and some, arguably, out of touch. Although finfluencers can bridge this gap, their accessibility comes with risks. Unlike certified financial planners, finfluencers are not held to a fiduciary standard and with the FCA’s recent Financial Lives survey finding that 49% of all UK adults had characteristics of vulnerability, the risk of questionable financial decisions is high.

Recently, the FCA has observed a rise in reports of fraud and scams involving financial influencers, particularly targeting individuals aged 19 to 40, as well as vulnerable groups. These scams often involve misleading investment opportunities, fake endorsements or pump-and-dump schemes, especially concerning cryptocurrency. For example, in 2021, a cryptocurrency called ‘Save the Kids’, promoted by several high-profile influencers, turned out to be a pump-and-dump scheme. Many followers invested based on the influencers’ endorsements, only to see the value of the token plummet shortly after launch, resulting in significant financial losses. This is an example of how easily trust in finfluencers can be manipulated for personal gain.

How are financial promotions regulated?

The surge in popularity for finfluencers has not gone unnoticed by regulators. The Financial Services and Markets Act 2000 states that promoting a regulated financial product or service without the approval of an FCA-authorised person is a criminal offence, and the FCA is actively monitoring and taking action against finfluencers who break this rule.

The FCA is also continuing to clarify and tighten regulations on how financial products can be promoted across social media. In March 2024 for instance, the FCA finalised new guidance that stipulates firms collaborating with affiliate marketers, such as finfluencers, must take responsibility for how their affiliates communicate financial promotions. Moreover, to better manage rogue and illegal promotions, the FCA also held an annual ‘week of action’ where direct requests are made to social media companies and websites to remove harmful promotions. The most recent campaign in June has reportedly resulted in 650 take down requests issued to social media platforms and more than 50 websites taken down. There were also three arrests, and four finfluencers were invited for interviews with the City of London Police.

What role can finfluencers play in financial education?

Although concerns about finfluencers persist, finfluencers could play a positive role in financial education, and help reach audiences put off by traditional financial institutions. For example, YouTube financial influencer accounts saw 8% median subscriber growth last year compared to 4% growth for other influencer accounts, showing there’s clear demand for financial advice among social media users. A growing wave of financial literacy not only benefits individuals, but also contributes to a more financially resilient and inclusive economy. And with influencers able to break down typically complex topics such as budgeting, investing, credit scores and retirement planning, there are ample reasons to be optimistic about the educational role of finfluencers.

But between a lack of certification of some finfluencers and the potential for conflicts of interest where influencers earn money by promoting certain products, significant concerns persist. To mitigate the risks, social media platforms are being encouraged to take down offending accounts more quickly after being notified by the FCA, but are also being urged to take a more proactive role in monitoring and removing unlawful financial promotions. This can be difficult, however, due to a tactic known as ‘lifeboating’, where scammers create multiple, nearly identical email addresses or social media accounts. When one account is reported or blocked, individuals can quickly switch to another, maintaining the illusion of legitimacy and continuity, and making it difficult for platforms to track and shut down fraudulent activity effectively.

Finfluencers: a positive for the industry, but caution should remain

The rise of finfluencers represents a significant shift in how financial advice is disseminated and consumed, and it is here to stay. And while there are a number of positives to the growth of finfluencers, the risks shouldn’t be ignored. To help people better understand the pros and cons of taking advice from influencers, it’s essential for regulators, social media platforms and the finfluencers themselves to work together to ensure that consumers get accurate and reliable financial information.

For more information on finfluencers and the advice market, please contact Erin Sims.