BY JOHN ELLIS, FINANCIAL ADVISOR
With the explosion of personal finance content on social media, millions worldwide, including those in Ireland, have turned to platforms like TikTok, Instagram, and Facebook for financial advice. Known as ‘finfluencers’, these influencers provide guidance on everything from budgeting and saving to complex investment strategies.
According to research from the Banking and Payments Federation Ireland, 23% of Irish people under 35 use social media as a primary source of financial information, underscoring how widespread finfluencer impact has become.
For many, finfluencers offer a blend of entertainment and practical information that appeals to younger audiences looking for money tips. These personalities “bring a unique blend of authenticity, humour, and relatability to their content, resonating with audiences far beyond the country’s borders.” Yet, with their rise comes an increased risk that followers might take the guidance at face value. Although such advice may increase clicks, financial decisions usually demand careful, personal planning, which broad online tips cannot address.
Personal finance decisions vary from person to person. As Barry Lenihan recently reported on RTÉ Radio 1’s Drivetime, “the financial priorities of a 55-year-old mortgage-free homeowner are vastly different from those of a 30-year-old new parent struggling with debt”. Despite this, many online advisors present their advice on a one-size-fits-all basis leading people to make unwise financial decisions without considering their personal circumstances.
For many, the engaging and easy-to-understand advice fills a void created by the perceived absence of accessible financial resources. However, the distinction between regulated financial advice and casual guidance remains a crucial one.
Financial advisors in Ireland are regulated by the Central Bank of Ireland, which enforces consumer protection law, compensation schemes, and impartial advice through bodies like the Financial Services and Pensions Ombudsman. The unregulated nature of finfluencer advice, particularly in high-risk areas like investment, in the main lacks these protections, leaving consumers vulnerable.
Internationally, regulatory bodies have started taking steps to curb misinformation and make finfluencers accountable. The European Securities and Markets Authority (ESMA) issued a statement recently reminding social media influencers of their obligations to provide credible and objective recommendations.
The UK’s Financial Conduct Authority (FCA) has teamed up with well-known influencers to promote safer financial practices while urging social media platforms like Instagram and TikTok to remove harmful, unlawful financial content. In Australia, the financial regulator demands that influencers discussing financial products hold licenses and provide balanced, accurate information. This global regulatory momentum highlights the need for similar vigilance in Ireland.
Crypto assets represent a particularly volatile sector where finfluencer advice can lead followers into risky waters. The Central Bank has repeatedly warned against investments in crypto, labelling them as “highly risky and speculative” and highlighting the dangers of crypto promotions via social media. In fact, you currently cannot invest through your pension in crypto currencies.
The European Securities and Markets Authority recently cautioned that finfluencers incentivised to promote crypto may fail to adequately communicate the risks, focusing instead on potential gains.
For a sustainable solution, consumer financial literacy remains essential. Educating consumers who rely more heavily on social media for financial advice, can help protect against the potential risks posed by finfluencers.
As the Competition and Consumer Protection Commission in Ireland pointed out in its 2022 Influencer Marketing Report, greater guidance on influencer marketing and responsible content is urgently needed. Strengthening regulations and offering educational resources are both crucial to ensuring that consumers can navigate online financial advice safely.
If you are seeking unbiased and professional financial advice, the best course of action is to consult a financial advisor who will tailor advice to your individual goals and circumstances. Personalised financial planning not only provides comprehensive, professional insights but also adds the peace of mind that social media soundbites cannot offer.
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