The Dark Side of ‘Finfluencers’: Regulatory Crackdown on Social Media Financial Advice

• December 3, 2024
• Carla Gandara
• no comments

In an unprecedented move, the Financial Conduct Authority (FCA) has initiated a comprehensive investigation into the growing phenomenon of financial influencers, or ‘finfluencers’, highlighting the significant risks posed by unregulated financial advice on social media platforms.

The Regulatory Landscape

The FCA’s recent actions underscore the critical challenges in the digital financial advice ecosystem:

• 20 unnamed ‘finfluencers’ interviewed under caution
• 38 alerts issued against social media accounts
• Potential violations of Section 21 of the Financial Services and Markets Act 2000

The Impact of Unregulated Financial Advice

Alarming Statistics

• 66% of 18-29-year-olds follow social media influencers
• 74% trust influencer financial advice
• 90% of followers have changed financial behaviors based on influencer recommendations

Potential Consequences

Unauthorized financial promotions can result in:

• Substantial fines
• Up to two years imprisonment
• Significant financial risk for vulnerable followers

Regulatory Perspective

Steve Smart from the FCA warns: “Finfluencers are trusted by young, potentially vulnerable people. They must ensure the products they promote do not jeopardize followers’ financial well-being.”

Case in Point: Celebrity Influencer Scrutiny

The investigation extends to high-profile cases, such as Logan Paul, who faces allegations of promoting cryptocurrency investments without disclosing financial interests.

Recommendations for Consumers

1. Verify financial advisor credentials
2. Be skeptical of social media financial advice
3. Consult regulated financial professionals
4. Understand the risks of unverified investment recommendations

Source: https://www.fca.org.uk/news/press-releases/fca-cracks-down-illegal-finfluencers