Finfluencers Can Say Whatever They Want Online. FINRA Is Paying Attention

The benefits of social media are evident: It can help bring in new clients and teach basic financial concepts. But all that glitters is not gold.

As more Americans turn to social media for financial advice, the risks of overreliance become increasingly apparent. Investment content shared online may be inaccurate, misleading or biased, according to a recent FINRA report, and so-called “finfluencers” often lack formal financial training. The agency issued a request for public comment earlier this month on how social media impacts investing, with input accepted through early May. Without clear disclosures of conflicts of interest, clients might make decisions based on incomplete or unreliable information, and advisors should get in early to push back against bad advice, experts said.

“We get contacted by the families we serve somewhat often [with] conversation starting out, ‘I saw this on Tiktok, on Instagram. What do you think?’” said Larry Sprung, founder and an advisor with Mitlin Financial. “A lot of times, it’s inaccurate and really not relevant to their situation.”

The Influencer Effect

Social media’s wide reach means that a broader range of voices — from individual creators to users on community forums — can share investment ideas and advice. While this accessibility can improve financial literacy and encourage greater participation, clients who depend too heavily on online sentiment may be led astray, experts said. One increasingly common, and worrisome, trend is that of insurance salespeople encouraging viewers to abandon their retirement accounts in favor of index universal life policies, investment vehicles that give buyers market-like returns inside o an insurance policy. “They’re putting out content talking about how nobody should have a 401(k) account, [that] they should be investing in index universal life policies,” Sprung said. “Which is kind of crazy.” There is also a lot of messaging around allocating more to cryptocurrencies like bitcoin, Sprung added.

Most of the time, however, finfluencers don’t fall under FINRA regulatory supervision. If someone is only licensed for insurance sales, for example, they don’t have to register with the agency. “There are plenty of people out there who call themselves financial advisors, but they really have no credentials,” Sprung said. “I think it’s problematic for the public.”

According to a separate FINRA report from October:

• Investors who rely on social media for financial advice had a much higher likelihood (72%) of taking on risky investments.
• Crypto (65%) and meme stock (77%) investors had a higher willingness to take risks.

A Friendlier Feed. One way to combat misinformation is to flood the zone with accurate content, said Falcon Wealth Planning founder Gabriel Shahin, who makes financial advice videos for YouTube, LinkedIn and Instagram. “I have a team of eight people that help me do this, where I just show up [and] record,” Shahin said. “There’s some people out there getting hundreds of their clients from YouTube on an annual basis. It’s credibility, and brand.”