Social media financial influencers, called finfluencers, are increasingly sharing information about investing. This can be done by ordinary people, or someone who is registered to provide financial advice, or by celebrities who have taken an interest in an investment. But is advice you see on social media right for you? Find out more.
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What’s a finfluencer?
Finfluencers are financial influencers who use their media accounts to talk about things like money management and investing. These content creators can reach a wide audience very quickly. They can potentially affect the financial decisions of thousands or more people through their posts or videos.
Finfluencers might use their social channel to:
- Share information about their own investment portfolio.
- Recommend what financial product or investment to buy or not buy.
- Give advice on how to manage your money.
- Wear branded clothing or advertise a financial brand.
- Tell you about an investment opportunity hot tip.
Are you considering sharing investment advice on your social channel? Finfluencers can play an important role in their followers’ financial lives, but there are things you should know before giving out any investment advice. Depending on exactly what you say and do, you may be engaged in activity regulated by securities laws. And the consequences of acting outside of securities laws can be serious.
What should you ask yourself before following finfluencer advice?
Sometimes finfluencers share information in a balanced, factual manner. But some finfluencers do not have any qualifications or training in the financial sector and can be engaged in activities, whether they know it or not, that require that they comply with securities laws such as being required to be registered.
If you come across financial advice from a so-called expert on social media, ask yourself:
- Are they being paid to endorse a product? Influencers and celebrities may post financial advice or investment recommendations because they are being paid to do so. This doesn’t necessarily make the advice relevant to you or your situation.
- Are they qualified to give financial advice? Check to see if this person has a financial certification or professional designation of any kind. If they are registered as a financial advisor or investment dealer, check their registration to find out if they are in good standing.
- Are they making big promises? Some influencers may make big promises about investment strategies or stock picks, without necessarily showing data to back up the claims. While it’s possible some recommendations may turn out to be valuable, others may end in failure. It’s wise to seek a qualified second opinion before acting. You can also connect with the OSC Contact Centre or check SEDAR+ to see if the investment being discussed has been given a receipted prospectus. Learn more about how to evaluate companies when buying stock.
- Are they telling you about the risks of an investment? All investments come with risk. Advice should include not just the upside of an investment but potential risks too.
- Are they an expert or an entertainer? Social media influencers thrive on building a wider audience for their content. As a result, they may use tactics to make their content entertaining and enjoyable to increase their audience. That can mean their advice is for mass consumption and not suitable for you.
- What’s the risk to you if this advice goes wrong? A finfluencer might give specific tips about what investments to purchase or how much to invest, but they may have very different portfolios or budgets than you. The reality is only you know how much you have available to invest. Know your risk tolerance, and don’t invest what you can’t afford to lose.
- Does their advice make sense for a Canadian? Many popular finfluencers are based in the United States. But the rules for investing and taxation in other countries do not apply to Canada. Make sure you know if the advice you are getting is relevant for you as a Canadian.
There’s nothing wrong with consuming social media. Keep in mind that your own financial goals and needs are personal. Advice shared by finfluencers may be popular but that doesn’t necessarily mean it’s right for you. When considering financial advice, make sure to properly assess any investment opportunity. Find out more about how to evaluate financial advice found on social media.
OSC research found social media financial influencers, or “finfluencers” have considerable influence on the decision making of retail investors. Find about more about how you may be persuaded by finfluencer posts.
Summary
Anyone can act as a finfluencer without having qualifications or training in the financial sector. Before taking advice from a social media financial influencer, ask yourself these questions:
- Are they being paid to endorse a product?
- Are they qualified to give financial advice?
- Are they registered with a securities regulator in Ontario or another province?
- Are they making big promises?
- Are they an expert or an entertainer?
- What’s the risk to me if this advice goes wrong?
- Does their advice make sense for a Canadian?
