Do you get financial advice from social media stars?

For many of us, social media influencers are a trusted source of information, advice and inspiration.

Whether it’s how to decorate our home or what skincare products we should use, personalities on TikTok, Instagram and YouTube are there with their recommendations.

And we value and act on what they say.

But that’s a concern when it comes to influencers giving financial advice, as they aren’t regulated professionals.

So if you act on their advice, you don’t have any legal protections.

Why you can’t rely on social media stars

Regulated financial advisers are required by law to follow strict rules and standards set by the Financial Conduct Authority (FCA).

So any advice they give must be genuinely in your best interests and suitable for you and your circumstances.

And if you’re not satisfied with the service you received, you can complain or turn to the Financial Ombudsman Service.

But none of this applies to so-called finfluencers.

They don’t have to act in your best interests or fact-check any claims they make.

In fact, they don’t even have to verify whether the products they’re promoting are genuine and legitimate.

So if you follow a finfluencer’s advice and lose a lot of money, you can’t do anything about it.

Social media stars are also trying to engage with a mass audience, not you personally.

So they can’t know your specific situation, your goals and your priorities, which means they can’t always give appropriate advice.

How many young people follow finfluencers?

According to an FCA poll of 18 to 29-year-olds:

• nearly two-thirds follow finfluencers on social media
• almost three-quarters of these people say they trust their advice
• nine in 10 followers say they’ve been encouraged to change their financial behaviour

On the one hand, the fact that so many young adults are following finfluencers on social media could be seen as a good thing.

After all, it suggests that they’re engaged with their finances, keen to make good financial decisions and willing to be proactive.

But that doesn’t count for much if they’re being led into making poor choices and potentially losing lots of money.

MPs now investigating finfluencers

The House of Commons Treasury Select Committee has now launched a new inquiry into social media stars offering financial advice.

Committee chair Dame Meg Hillier has already raised concerns over the popularity of finfluencers, telling the Financial Times there’s a difference between people turning to specialists like Money Saving Expert founder Martin Lewis and “some random on TikTok”.

And this week, it will hear from Steve Smart of the FCA, who recently said that those who follow finfluencers are “often young and potentially vulnerable people attracted to the lifestyle they flaunt”.

The inquiry comes shortly after a group of reality TV stars, including The Only Way is Essex's Lauren Goodger, Love Island's Biggs Chris and Geordie Shore's Scott Timlin, were charged with promoting an unauthorised investment scheme on Instagram.

They have pleaded not guilty to the charges but could face up to two years in prison if convicted.

The FCA has also been carrying out targeted action, including interviewing 20 finfluencers under caution and issuing 38 alerts against social media accounts that may contain unlawful promotions. 

How to protect yourself from bad financial advice

If you want to be sure that you’re getting financial advice from a trusted source, there are several steps you can take.

Check for FCA accreditation

Find out if the individual or company giving financial advice or promoting financial products is regulated by the FCA.

A regulated professional must meet minimum standards, so you can be sure you’ll get personalised expert advice based on your specific circumstances.

You can check whether a financial adviser or firm is authorised on the FCA website.

Do your own research

If an influencer is pushing a particular financial product, look for reviews and comments on other platforms, not just social media.

Be cautious about high-risk investments

Many social media stars will promote high-risk financial products like cryptocurrencies or forex trading.

So don’t rush into any investments just because your favourite influencer is recommending them and promising quick returns, as you might lose lots of money if they go wrong.

A finfluencer might have lots of followers, but that doesn’t mean they’re an expert on money and qualified to give financial advice, so don’t take what they say at face value.

Check out our guide on getting financial advice to find out more.