Finfluencers Sell Expensive Advice, Often Without the Finance Chops to Back It Up

Financial influencers, or finfluencers, are moving markets. A study of 15 paid Discord servers found that finfluencers’ legions of followers temporarily pushed up prices when they rushed to buy recommended options. 

The users can pay hundreds of dollars monthly for access to Discord servers led by admins that offer investing recommendations like “BTO $EBAY 72c 05/09 @0.30.” That’s shorthand for buying an eBay call option set to expire in two days. Subscribers act on advice like this within minutes, the academic study found, causing a ripple in prices that can last for a couple of hours. The eBay option rose 30% within five to seven minutes of being recommended on the server. 

The study found that most trades in the chat were speculative options with median expirations of three days. Subscribers analyzed in the research responded the strongest to the most speculative recommendations. 

Shifting Trust

WallStreetBets, the famous Reddit forum, introduced a new generation of traders that actively participated in markets, often with high-risk trades. These retail traders followed each other’s advice and together, they moved markets, catalyzing the steep climbs GameStop and AMC shares experienced in 2021. 

Finfluencers evolved from that growing sentiment — that anyone can offer financial advice worth following and anyone can grow wealth with active investing. As they amassed followings online, some started offering paid subscriptions for access to exclusive advice, no Series 7 needed:

• About two in 100 influencers offering financial advice were qualified to do so in a study of 1,700 posts with more than 692 million combined views, consultancy Legalaes found. Nearly a third of the posts were misleading. There are exceptions: Arguably the most famous influencer, GameStop ride-or-die Keith Gill AKA Roaring Kitty, was a licensed broker when he started his channels (that status was revoked later on).
• Offering financial advice, especially in a paid server, is legally murky territory. But so far, it’s largely flown under regulators’ radar. 

Cherry-Picking: A financial influencer running a $100 a month Discord server, who spoke to The Daily Upside on the condition of anonymity, said he frequently sees accounts market themselves by pointing to rare large wins. A screenshot of a big win brings in new subscribers, even if most subscribers won’t see those kinds of returns. From his POV, investors should see super short-term recommendations (like the eBay call) as high-risk gimmicks, and ultimately, red flags.