How Social Media Shapes Your Financial Decisions

Finance-related content on social media has become very popular, which has opened doors for more finfluencers on the platforms. These influencers strictly upload finance content to their social media accounts, mainly to offer advice in the hope of growing their audience. They will also take part in advertisements for financial products by sharing their experience with a particular service or finance topic.

Social media has great power when it comes to shaping users' financial decisions. It's often easy to understand, very accessible, and free to view. This is very different from other forms of financial advice, which can be behind paywalls or subscriptions. Previous studies have shown that social connectedness affects institutional investor decisions and international trade and financial flows between regions and countries. This is why finfluencers have become powerful figures in the financial industry.

Learn more about the rise of Finfluencers, as we explore their impact on the finance industry as well as outline their positives and negatives.

Impact of Finfluencers on Investors

Finfluencers can shape investors' decisions, especially if they don’t have extensive knowledge of the industry. They usually cover a range of topics, such as personal finance, cryptocurrencies and the stock market.

Most finfluencers have a genuine aim of educating their audience, but some out there will leverage their position to promote and sell products to their followers for monetary gain. This makes the world of Finfluencing very blurred, as you need to be cautious about what accounts you decide to trust. The last thing you want is to follow advice or get involved with a service that can leave you in a bad financial state. If you are in need of support with your finances, there are plenty of financial protection options available.

Before blindly following the advice of a finfluencer you should make sure they’re legitimate, trustworthy and reliable. You should always conduct your research on any information that you receive on social media from finfluencers, as you want your financial decisions to be shaped positively.

Evaluating Finfluencers

Before trusting the advice of a finfluencer, you should make sure that all the information they are giving out is accurate and legitimate. This can be done through proper evaluation of finfluencers and you can do this in several ways:

Verify their credentials: Are the finfluencers qualified accountants or experienced tax advisors? Don’t take information as a guarantee if the finfluencer isn’t qualified.
Cross-check information: Look at the advice given on official sources, such as HMRC, to see whether the information provided by the finfluencer matches up. You don’t need to agree with the advice, but it’s important to check legitimacy.
Be cautious of advice: If you see advice from finfluencers that seems too good to be true, it probably is. Easy money tips are often false information, so you need to stay cautious.
Look for endorsement transparency: Finfluencers who are very open about endorsements and show high levels of honesty are a good sign. It shows that they are transparent with their audience.
Be aware of paid endorsements: If an influencer uploads advice content within a sponsored post, you need to be aware that it could be biased information. Platforms like Instagram and TikTok are very popular for paid endorsements.

Luckily, the FCA is cracking down on illegal finfluencers by launching targeted action against those who may be touting financial services products illegally.

The Positives of Finfluencers

Simplification

Financial concepts can often be complex and difficult to understand like cash flow analysis, especially if you are beginning your finance journey. This can make the information less accessible to wider audiences, which can limit the industry. Finfluencers are great at simplifying complex financial information. This can help improve the financial literacy of their followers and this can boost the industry as a whole.

Builds Community

Finfluencers can build communities through transparency and relatability, which can help their followers form a sense of trust and personal connections. This can lead to better discussions between the community, who can help each other with their financial journeys. Having a supportive environment for learning is always positive, no matter what you are trying to learn about.

Positive Influence

There is a power that finfluencers have and they can use this to make a positive impact within the financial community. They can guide trends and promote responsible financial practices by influencing their followers to budget correctly, save money and invest smartly. They must try to give genuine advice that their followers can use effectively.

The Negatives of Finfluencers

Misinformation

The potential to spread misinformation is a growing concern due to the rapid rise of finfluencers in recent years. Finfluencers could lack the knowledge required to offer accurate information and advice to their followers, as there is often no proof as to whether or not they are qualified to do so. The absence of regulatory oversight also plays a factor.

Product Endorsements

Finfluencers can be paid to promote a product and endorse it to their followers, which can lead to ungenuine opinions and bias. While some endorsements will be genuine and the finfluencer could have a genuine passion for it, you can never know for sure. There will always be a blurred line, which can call into question whether or not you can trust it.

Investment Risks

There is no guarantee with investments, as it's a very volatile industry and can be risky. Finfluencers can create excitement about specific investment opportunities and encourage their followers to get involved. Listening to someone else’s opinion on what you should do with your money is always risky, so you should consider this before making any investment.

How Should Investors Pursue Finfluencers’ Content?

If you don’t want to rely on finfluencers for financial advice, you can still look to them for knowledge and information about certain areas that you aren’t too sure about. They can help you to consider different parameters that you might not have previously considered, as getting a variety of opinions can be very helpful when it comes to making decisions. You can take the time to monitor specific finfluencers to see if they are trustworthy before taking in any of their information for yourself.

You shouldn't rely on them to help you manage your finances, even though it’s easy to follow them, as there are more viable options. Professional financial advisors are a better option because you can speak with them face-to-face. The main benefit is that they can create a plan tailored to your specific needs.

Investors can utilise finfluencers to help them further expand their knowledge, but they shouldn’t follow all of their advice as good advice isn’t one-size-fits-all. It’s crucial that you only make investments that you believe in and take the time to learn about yourself. This can be on the back of an initial recommendation from a finfluencer, but you should always conduct your own research.

Conclusion

Social media is one of the most powerful tools in the world when it comes to providing and receiving financial information, as there is a large range of content that can be posted on platforms like Instagram, Facebook and Twitter. Depending on the platform used, finfluencers can target a specific audience age group with Facebook being the go-to website for older audiences and Instagram for a younger audience.

The rise of finfluencers is the driving force behind this upward trend of social media financial advice, as they have the power to shape the decisions of beginner investors. You need to ensure that you find finfluencers who are well-trusted within the community and are known for offering reliable advice to their followers. It’s also essential that you conduct your own research before allowing your financial decisions to be shaped.

Author Bio

Daisy Moss works with the team at PH Credit, a leading credit insurance broker offering expert financial protection and personalised service to businesses across industries. She specialises in creating engaging content to enhance financial knowledge and support business growth. When she’s not writing, you’ll find her trying (and often failing) to bake for friends and family!