Finfluencers in the Spotlight

For the most part, financial advice can be dry. That’s precisely the gap in the market that Finfluencers look to exploit. These finance whizz kids are sharing investment tips, recommending banks and payment apps, and teaching us how to save money. But hold up, because regulators like CySEC (Cyprus Securities and Exchange Commission) and the UK’s FSA (Financial Conduct Authority) are warning against such “advice”. Today, we’ll find out why, before giving you our regular weekly trading run-down. Let’s do this!

Hold on, what’s a Finfluencer?

We’re all pretty familiar with the role of “influencers” today. But, now a new breed of financially-focused influencer has emerged — the “finfluencer”.

Finfluencers utilise Instagram and TikTok to offer insights into personal finance, investment strategies, and financial education. Many are aligned with finance brands, so the end game is usually to promote a trading platform, credit card or app.

Successful people sharing their advice and helping others enjoy some success — sounds awesome! But, there are some controversies surrounding these individuals and they’ve recently been brought into focus by two of the most powerful regulators in finance — CySEC and the FCA.

What did the regulators say?

The main issue that regulatory authorities have with finfluencers is that they often lack proper financial qualifications, and their recommendations might not be suitable for everyone, particularly those who have little financial education themselves.

Additionally, they often promote quick wealth whilst sitting on a tropical beach, making it all look super easy. Largely that’s not the case and falls very much in the non compliant arena.

CySEC recently directly warned about the “risks associated with following simplified investment advice on social media.”

The regulator even went as far as conducting a study to find out just how popular this method of investing is. According to that study, 31% of respondents make their financial investments based on the advice of a financial influencers from platforms such as TikTok, YouTube, Instagram, and Twitter.

The FCA chimed in too, highlighting the pressure some finfluencers put on viewers to invest quickly, without taking the time to conduct proper research — which we all know is a fundamental part of any successful trading strategy.

This is (kinda) old territory

Just in case you didn’t know, this isn’t a brand-new phenomenon in 2024.

Social trading — where traders effectively blindly copy the actions of professional traders (sound familiar?) — has been around for years.

The difference here is that with social trading, there’s usually an element of proven professionalism. The trader being copied usually has a solid background in trading and some tried and tested method/strategy that they impart for a share of your spoils.

The fear with finfluencers is that increasing amounts of people, notably young people, are recklessly trusting strangers with little or no knowledge of the markets themselves. This is dangerous. The lack of regulatory oversight and transparency in finfluencer content, rightly raises concerns about the reliability and objectivity of the information provided. Until the regulators have a clearer picture of how to deal with these individuals, there will always be questions hanging over the practice.

Are you being Finfluenced?

Do you seek out the wisdom of finfluencers? Or perhaps you’re a finfluencer, yourself — how do you feel about regulatory concerns? Join the debate over on X at @_contentworks.

Top fundamental events week commencing 08/04/24

It looks to be a super-busy week ahead. Let’s see what’s in store…

Monday

● EUR — German Balance of Trade

Tuesday

● AUD — Westpac Consumer Confidence Change; NAB Business Confidence

● JPY — Consumer Confidence

Wednesday

● USD — Inflation Rate MoM; Core Inflation Rate MoM; Core Inflation Rate YoY; Inflation Rate YoY; FOMC Minutes

● CAD — BoC Monetary Policy Report; BoC Interest Rate Decision

Thursday

● EUR — Deposit Facility Rate; ECB Interest Rate Decision; ECB Press Conference

● USD — PPI MoM

Friday

● CNY — Chinese Balance of Trade

● GBP — GDP MoM; Manufacturing Production YoY; Manufacturing Production MoM

● USD — University of Michigan Consumer Sentiment Index

Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.

Speak soon!

The Contentworks team