Rise of the ‘finfluencers’: Instagram, Facebook and Reddit drive investment ideas in young people
Young people are increasingly turning to social media for investment ideas even as the Financial Conduct Authority (FCA) starts to whip out regulation on the field of finance influencers – or ‘finfluencers’ as they are often known as.
Over a fifth of investors ages between 18 and 34 are taking investment advice such as stock tips and market forecasts from Instagram gurus and influencers, according to a new Opinium survey of 2,000 people commissioned by Hargreaves Lansdown, a British financial services company.
Other social media forms are also popular with young investors, with 16 per cent browsing Facebook for ideas, 14 per cent sourcing inspiration from Reddit and eight per cent scrolling through TikTok for guidance.
These figures are up since September 2021, the last time the question was put to respondents of the survey, which runs every half year.
In September 2021, only 17 per cent of 18–34-year-olds got their investment ideas from Instagram and 12 per cent from Facebook.
An increase was also seen in the 35 to 54 year old age bracket, with nine per cent now going to Instagram for help with investing compared to five per cent two years ago.
“Unsurprisingly”, said Emma Wall, head of investment analysis and research at Hargreaves Lansdown, this falls to zero per cent for investors over the age of 55, who are more inclined to rely on themselves for investment advice without depending on external sources.
“While engagement with investing should be applauded at any age, taking tips from unregulated or unverified sources, such as social media, should be done with caution,” said Wall.
However, for all age groups and genders, the top source of investment ideas is financial websites.
Responding to the study, an FCA spokesperson said that although social media has helped firms communicate with consumers more effectively and reach a mass audience more quickly, the regulator wants to “ensure that consumers can access high quality marketing information that enables them to make informed financial decisions.”
“We are updating our social media guidance to firms to clarify what we expect when marketing financial products online.
“FCA engagement has also helped to secure changes to the advertising policies of several Big Tech companies to only allow FCA authorised firms to market financial services, including investments.”
Just last month, the FCA said it is set to roll out new social media guidance to “modernise the information firms should use when promoting financial products or services online”.
The social media clampdown aims to target ‘finfluencers’ and firms flogging crypto schemes and financial products online with misleading adverts.
“Among the guidance is a reminder that some of these promotions can actually constitute a criminal offence,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
Finfluencers are a growing cohort. In August last year, it was estimated that finfluencers saw an average of eight per cent annual growth rate in followers in 2021 – double the growth rate of all other influencers – according to a report from Performance Marketing World.
As part of a broader campaign this year, the financial watchdog has tabled potential measures including forcing banks to ramp up savings rates and support struggling customers, and warning insurance firms not to penalise people with unnecessary add-ons.