If you’re a fan of the popular ITV show The Only Way Is Essex, you may be familiar with one of its former stars, Lauren Goodger. In August 2021, the Times reported she was found to have “misled” followers when she featured a foreign exchange trading advert on social media.
The Advertising Standards Authority ruled that the former TOWIE star had failed to clarify that a post on her Instagram account for the trading platform FxPro was an advert. It also concluded it was misleading, as claims about potential profits could not be substantiated.
The incident highlights how celebrities and social media “influencers” increasingly affect our purchasing decisions, from beauty products to furniture and clothes.
Alarmingly, some are now promoting financial products and investments despite not being qualified to do so. More than this, while the influencer may not have used the product or service they’re promoting, followers may assume they’ve had a positive experience and invest.
In far too many cases, this could result in the follower losing some, or even all of their money. So read on to discover three reasons influencers’ advice could damage your wealth, and why you should only ever trust a qualified Financial Planner.
1. Social media has created a platform to promote high-risk investments
Using the internet and even social media to share financial information and help people make better financial decisions is nothing new. When done responsibly by those qualified to comment, it can be a good way of passing on useful facts that could help people make better financial decisions or protect their wealth.
The issue is that in recent years there has been a new source of information, provided by those who typically provide it for payment. As Money Marketing points out, there are now hundreds of accounts across Facebook, Instagram, TikTok, and YouTube making unqualified claims about investments.
Worse than that, claims about potential profits may not be backed up, and as the investments are typically high-risk, there is a significant chance that investors could lose money.
2. Some influencers could be promoting financial scams without realising
As the Money Marketing article explains, influencers promising high-return investments often do not include regulatory disclosures and approvals.
This means that the potential for the products to be a scam are significantly increased, especially where the product is cryptocurrency, according to the FCA.
Worse of all is that the influencer themselves may not realise they’re promoting a scam. In April 2021, the Tech Times revealed that financial influencer Matt Lorion apologised to millions of TikTok followers after promoting a cryptocurrency called “Mando”. It turned out to be a scam.
3. The Financial Conduct Authority has warned consumers to be wary
The risk posed by financial influencers to your wealth is seen as so serious that the Financial Conduct Authority has warned internet companies that they need to do more to protect potential investors.
According to the Guardian, the FCA’s chief executive Nikhil Rathi called on internet companies to help protect consumers against investment opportunities that he said “prove too good to be true”.
The article adds that the FCA also stated that companies such as Google should “bear a legal liability” for financial promotions they pass on to consumers.
“Consumers shouldn’t be subject to lower standards or greater risks because they find an investment online,” Mr Rathi told the Guardian.
Bona fide financial planners are authorised and regulated
Unlike influencers, financial planners must have the relevant qualifications and regulatory authority to recommend products. In addition, they have to demonstrate to regulators that they are continually developing their knowledge to ensure they are up to date with changes in products and the markets.
As a result, they understand whether solutions and investments are right for you and can explain them clearly so that you can make a decision you won’t later regret. This provides peace of mind that an investment has the growth potential you’re seeking with a level of risk that is suitable for you.
Get in touch
If you’re a DIY investor, it could be easy to trust someone you feel can provide a valuable input without realising they’re not qualified to do so. If you would like to discuss investments with a qualified professional, we’d be happy to talk. Simply email us on email@example.com or call on 01904 655 330.
This article is for information only. Please do not act based on anything you might read in this article. Contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down and up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and your financial circumstances.