The impact of social media personalities who provide financial advice, known as ‘finfluencers’, is dwindling, research finds.
Just over a third (37%) of people in the Gen Z cohort, born between 1997 and 2012, said they used finfluencers as a source of financial information.
This is compared to half of the respondents asked in 2021, and the drop furthers to millennials too.
For those aged between 28 and 43, less than a third (32%) take notice of what celebrities or other social media personalities say online about finances and investments.
That marks a 10% drop compared to 2021 when the investment company’s research began.
Meanwhile, the sway of celebrities who endorse investments dropped even further, with just under a third (32%) of millennials taking their advice on board.
This was over half (51%) when asked in 2021, while Gen Z investors had 35% using celebrities as a source of investment help, a decrease from 45%.
Increase in attention paid to the financial press
It comes as nine in 10 (87%) UK retail investors admit they lack sufficient levels of financial knowledge to improve their portfolios. So, more (58%) are turning to professional avenues to boost their returns than they were three years ago (51%).
Over half (52%) also turn to financial writers in newspapers, websites and other press outlets to assist their next investment choice. That’s up from 45% in 2021.
Richard Flynn, UK managing director at Charles Schwab, believes the change in approach from young investors signifies a changing financial climate.
Flynn said: “Since we began this study at the end of 2021, domestic and international markets have experienced varying levels of volatility and uncertainty.”
‘Reassuring’ rise in professional advice sought
“It is therefore reassuring to see a rising – and notable – number of investors proactively seeking professional advice in order to make the most of their investments,” Flynn said.
In March, there was an intensified crackdown on finfluencers when the Financial Conduct Authority (FCA) enforced new rules.
The regulator’s action followed a high-profile case with Kim Kardashian, which led to the reality TV star paying over a million dollars in October 2022.
Finfluencer legislation launched in March
This was for promoting a cryptocurrency in 2021 that eventually “plummeted like a stone”, according to Susannah Streeter, head of money and markets at Hargreaves Lansdown – which won Best Lifetime Investment ISA at the YourMoney.com Awards 2024.
Now, firms or finfluencers who promote financial products and give advice will need to include appropriate risk warnings with all their promotions on social media ads.
This includes memes, reels and videos posted on platforms including TikTok, Facebook and Instagram.
Laura Suter, director of personal finance at AJ Bell, said: “There is a darker side to many of these posts and a significant risk of finfluencers spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks, without properly explaining those risks.”
Suter added that “there is a real danger that financial social media becomes a Wild West, rather than a space to get accurate, clear information on financial planning.”
