One TikTokker says you can "turn $1,000 into $1,000,000 in 100 days." Another promises that "in real estate, you can make money out of thin air." And another says you can become a millionaire by stealing hotel soap, avoiding store-bought cleansers and investing your savings in an index fund.
If these scenarios sound too good to be true, it's because they are. They're the words of "finfluencers" — social media celebrities who offer financial advice to their followers. While not all finfluencers are malicious, experts warn that many of them spread misinformation, confuse investors or even push stocks that they're secretly paid to promote. And to make matters worse, they do it with all the skills of persuasive entertainers.
"We're living in an age of very talented emotional galvanizers that have the ability and the medium to tell very attractive stories and can use language that you would never dare [use] to evoke emotion in clients," said Andre Jean-Pierre, an RIA and the managing director of
Finfluencers are not bound by the same regulations as financial advisors, and the rules that do apply to them aren't always enforced. Without those guardrails, there are few limits on what they can say — and, in some cases, nothing forcing them to disclose who's paying them to say it. The North American Securities Administrators Association (NASAA), a coalition of financial regulators across the continent, recently
"Finfluencers are testing the limits of what is considered regulated investment advice and protected free speech," NASAA said. "While there is nothing new about marketers paying celebrities to endorse their products, what IS different is that such breezy and hyper-emotional endorsements are being made in what is otherwise a very regulated industry with stringent rules about performance claims and disclosure of potential conflicts of interest."
A vulnerable generation
In a country rife with elder fraud, one might expect the victims of finfluencers to be aging baby boomers. In reality, the targets tend to be much younger.
According to NASAA, most millennials and Gen Z-ers get their information about investing from social media, rather than from brokerages or financial advisors. That trend has only accelerated in recent years. In 2021, in the wake of the COVID-19 pandemic, downloads of investment apps increased by 20%, and time spent on those apps nearly doubled. All of this created new and eager audiences for finfluencers to peddle questionable advice, if not outright misinformation.
Jean-Pierre, who advises many investors in their early 20s, said he often finds himself trying to talk clients out of an investment they heard about on Instagram or TikTok. The problem, he said, is not that such clients are naive about the internet, but that they're too familiar with it.
"I am afraid for the younger generation, the 20- to 21-year olds… being taken advantage of because their whole experience has been online," Jean-Pierre said. "I feel like so much of their identity was formed online, so they have a bigger trust in the stranger on the internet than previous generations have had."
What to look for
Like any scam, misinformation from finfluencers has certain telltale warning signs.
"One of the dead giveaways is the swear word of 'guaranteed,'" Jean-Pierre said. "As soon as the word 'guaranteed' comes out, you can pretty much throw the entire thing in the trash."
The reason is simple: No one can perfectly predict the stock market. If someone claims an investment carries no risk, Jean-Pierre said, they're either unaware of the risk or not being honest about it.
Other red flags include the common hallmarks of scams: creating a false sense of urgency; refusing to disclose sources of information; and not showing credentials or registration as a financial professional.
But there's also another that's more specific to finfluencers: contempt for professional expertise. Many of the misinformers on social media, Jean-Pierre said, "just completely dismiss everything with regard to the financial industry" and present themselves as the only ones with the real answers.
This can be surprisingly persuasive to younger clients, many of whom measure credibility with their own, internet-era yardsticks. The blue "verified" checkmark on Twitter, for example, can be "the end-all be-all" for some Gen Z investors, Jean-Pierre said. Others look at a source's number of followers — and finfluencers sometimes have hundreds of thousands more than the official news sources.
"You can show them the actual news, and they'll say, 'You know what? The Wall Street Journal is wrong, the New York Times is wrong,'" Jean-Pierre said. "'You guys have it all wrong, and this guy on YouTube has it right.'"
How advisors can help
As with any unwise investment, the key to steering a client away from a finfluencer's advice is to discuss it transparently. Financial advisors can help clients spot the red flags of misinformation, research the finfluencer's credentials (if any) and examine the risks of the investment.
"You can't run from the conversation," Jean-Pierre said.
If that's not enough, advisors can also do a "deep dive" into the finfluencer's previous market predictions. For some of them, the stock may have skyrocketed as predicted — in some cases because of the online hype — but then plummeted shortly afterward. Finfluencers usually leave that part out. In other cases, the stock may never have risen, but the finfluencer deleted his or her post to hide the evidence. Internet sleuths often provide
Also, as NASAA has pointed out, advisors can help clients report a suspected scam — both to securities regulators, which can be contacted through the
Last but not least, advisors can encourage a healthy skepticism.
"Remember, finfluencers are making content for their own financial gain," the NASAA advisory states. "If their strategies and picks worked out so well, is there a reason they are spending hours making social media content?"
Jean-Pierre echoed this advice.
"My thing is, don't trust. Verify," he said. "And when you trust, still verify."
