It has also set up alerts to appear next to influencers (financial influencers) on social media which warn users that unlawful promotions could be part of the post.
Since March 2024, social media personalities have been required to adhere to new guidance while influencers have been warned they can not promote financial products or services without the necessary approval from the FCA.
If finfluencers do not include risk warnings about investments or services in their social media posts, they could be committing an illegal offence.
The content creators were also asked to review if they were a reliable enough source to promote financial products and the FCA reminded the online users they had to follow the Advertising Standards Authority’s (ASA’s) expectation of labelling the content as an advert when doing so.
This is to make clear to their followers on social media the vested interests of the content.
How life insurance can benefit your health and wellbeing over the decades
Sponsored by Post Office
The latest crackdown has come after over three years of finfluencers offering unregulated advice and advertising financial services on social media platforms including TikTok, Facebook, Instagram and Twitter.
In June, the FCA charged nine people for promoting an authorised foreign exchange trading scheme on social media.
The FCA alleged that two finfluencers advised followers about buying and selling contracts for the difference when they were not authorised to do so.
Those investments are high-risk and involve investors betting on the price of foreign currencies to make their profits.
Almost two-thirds of adults aged under 30 follow social media finfluencers, while three-quarters said they trusted their advice, according to the FCA’s research.
Further, nine in 10 young people with social media accounts also said they trusted their advice to the point of changing their financial behaviour.
Steve Smart, joint executive director of enforcement and market oversight at the FCA said: “Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt.
“Finfluencers need to check the products they promote to ensure they are not breaking the law and putting their followers’ livelihoods and life savings at risk.”
Due to legal reasons, the 20 people interviewed under caution by the city watchdog have not been named.
‘People blindly trust anything they see on social media”
Laura Suter, director of personal finance at AJ Bell, once described financial social media as “becoming like a Wild West, rather than a space to get accurate clear information on financial planning”.
Following the new FCA interviews, Suter said: “Too many people blindly trust anything they see on social media, but throw in a well-known celeb or a reality TV star endorsing a product and people are even more likely to trust a post.
“This isn’t a huge problem if you buy some dodgy beauty products or sign up for a duff subscription, but if you put your life savings into an investment because someone from the TV said they made impressive returns, that could be life-changing.”
However, Suter also added that “not all financial content on social media is bad.”
She said: “The wealth of support and information available online can be a valuable resource for new investors.
“Finfluencers can make complex aspects of saving or investing accessible and engaging, helping people make better-informed financial decisions. However, there’s a darker side, with significant risks of finfluencers spreading misinformation or promoting high-risk behaviours, such as day trading individual stocks without adequately explaining the risks involved.”
The investment platform provided four tips for social media account holders to dodge any investment scams from finfluencers.
How to avoid being scammed by finfluencers
- If you don’t understand the investment or how it works, don’t buy it. This is often the case when people get caught up in scams – they involve complicated ‘contracts for difference’ or foreign exchange trading schemes that most investors wouldn’t be able to understand.
- Do your own research. Make sure you get information from different sources and don’t just rely on social media or one recommendation – this also applies if family or friends introduce you to a financial product: do your own digging
- Don’t be pressured into anything. Often scammers will put a time pressure on a purchase, so you don’t have time to consider it. They’ll say the opportunity is only around for a few hours or that you need to sign up immediately – if that’s the case it’s very likely a scam. Equally, they may say the offer is exclusive to you – that’s another big warning sign.
- Be wary of anything where they have approached you. Often scammers will slide into your DMs on social media with a “great” offer that you can’t refuse. No legitimate investment company would contact you out of the blue on social media with an investment. Delete the message and block the contact. The same is true of texts, emails and phone calls out of the blue.
