Investors fall out of love with finfluencers as more head for traditional financial advice

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

So-called ‘finfluencers’, social media influencers who specialise in financial advice, have grown in 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 waned, falling 13 per cent among Gen Z.

Unqualified: Finfluencers are unlikely to have the same financial advice qualifications that professional financial advisers are required to (stock image)

Now only 37 per cent of adults aged 27 or younger are heading to finfluencers for advice, according to research by investment platform Charles Schwab.

Millenials, those aged between 28 and 43, have also begun to move away from them as a source of financial advice, with 42 per cent still looking to these personalities, down from a previous 52 per cent.

Should you get a financial adviser? 

It is unsurprising that finfluencers have managed to worm their way into the financial guidance sector, with their free advice coming in stark contrast to the fees of financial advisors.

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

But that advice can be valuable, as a massive 87 per cent 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’re considering investing, it pays dividends to seek guidance from a qualified financial adviser.

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

As many as 81 per cent of retail investors in the UK think it is becoming more important to consult financial experts when it comes to their investment strategies, according to Charles Schwab.

Too good to be true: Karen Barrett warns that finfluencers don’t have financial advice qualifications

Some 58 per cent of these investors already seek advice from professional financial advisers, an increase of seven per cent from last year, while the number heading to the financial press for information also rose by seven per cent to 52 per cent.

Richard Flynn, Charles Schwab UK managing director, said: ‘The current macroeconomic climate continues to shape the attitudes and behaviours 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 rising – and notable – number of investors proactively seeking professional advice in order to make the most of their investments.’

While some of what is promoted by finfluencers is no doubt sound advice, it is wise for people not to put too much stock in what they are suggesting or what investments they promote.

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

Barrett told This is Money: ‘While finfluencers can offer helpful general money tips, it’s worth stressing they don’t need qualifications to be one.

‘As the Financial Conduct Authority has started to crack down on misleading ads from finfluencers, including recently updating its guidance, more people are likely questioning their decision to take their advice at face value.’

She added: ‘This is a wise decision on the FCA’s part as they aim to help protect people from unsuitable advice that could be harmful and cost them money.’

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

Meanwhile, the Gen Z following has fallen to 35 per cent, from 45 per cent previously.

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

Similarly, footballer Cristiano Ronaldo is currently being sued for more than $1billion after he promoted Binance NFTs on Instagram in a manner that a class action suit filed in the US alleges was ‘deceptive and unlawful’.