The Disciplined Investor
The Age of the Finfluencers
Who should you listen to when everyone is talking? Scroll through your social media feed after a major move in the market, and you’ll see a flood of hot takes, bold predictions and “can’t-miss” tips.
Welcome to the age of the influencers or should we say “finfluencers”—social media influencers who broadcast their takes on investing, budgeting and other financial topics to large online audiences.Here’s the thing: A finfluencer might be a highly credible financial professional, or they might be an enthusiastic amateur.
They could be a sports star who dabbles in cryptocurrency or a trendsetter who has big thoughts on budgeting. But regardless of who’s dishing out advice, people are listening. In fact, more than 40% of people haveconsidered acting on advice from finfluencers—and that number is higher among younger investors.
And while some advice may be sound, much of it is self-serving or flat-out wrong. Separating good advice from bad isn’t always easy.
Protecting yourself from inaccurate financial advice—whether from media sources or influencers—is critical to making sound financial decisions. You have the power to protect yourself—and your loved ones—from risky financial advice. Here’s a closer look.
The Hidden Risks of Online Advice
When it comes to financial advice from big names in social media, there are several concerns:
Accuracy. Posts on social media spread because they’re engaging, not because they’re accurate. Plus, it’s not always obvious which finfluencers are academics or professionals with expertise who may be pushing sound advice, and which ones aren’t.
One thing you can do is investigate their backgrounds. Do they have relevant experience, or are they just popular? Are they licensed or registered to provide financial advice? Have they been disciplined by any financial regulatory bodies?
You can look up brokers and financial advisors using FINRA’s Broker Check to find out if they are registered to offer investment advice and whether they’ve had any complaints or regulatory action taken against them.
Relevance. Even if a piece of financial advice on social media comes from someone knowledgeable, it still may not be useful to you. Your financial plan is tailored to suit your unique circumstances and goals. Finfluencers don’t know your personal financial situation and life goals. So even tips that are accurate may not be relevant to you. Be wary of “one-size-fits-all” advice.
Bias. Why is the information being shared? Are the influencers selling something? Influencers or media outlets may have affiliate deals, sponsorships, or undisclosed compensation.
Finfluencers—like all social media influencers—are obligated to disclose when they’re being paid to promote. Back in 2022, the SEC fined Kim Kardashian $1.26 million for failing to disclose that she was paid $250,000 to promote a cryptocurrency on Instagram. But even if they’re not getting paid, they might be pushing an agenda or simply trying to bump up their page views. If they lead you astray, they may not face any consequences at all.
Red flag: Are they promoting specific products like stocks, crypto, or leveraged investments?
Increased risk. Investors who rely on social media for advice may be more likely to invest in riskier assets. Social media investing played a significant role in driving up the price of meme stocks beginning back in 2021. The Federal Reserve warned that social media may increase risk for individual investors and the entire financial system due to speculation and a bias toward riskier stocks.
Hype and sensationalism: Slogans such as “Get rich quick,” “beat the market,” or “once-in-a-lifetime opportunity” should raise alarms. Fear-based or FOMO-driven content is often designed for clicks, not your financial well-being.
A Note on Confirmation Bias
Speaking of biases, social media platforms are basically designed to become echo chambers. Algorithms learn what kind of content you like and feed you more and more of it. If your feed is tailored to your tastes and opinions, the posts you’re seeing may land you in the behavioral trap known as confirmation bias. Confirmation bias describes the very human tendency to favor messages that reinforce our preexisting beliefs. If the financial advice we’re seeing confirms what we already think, we’re more likely to accept it—and perhaps act upon it—whether it’s valid or not.
Learning to recognize this bias can help you counter it, which involves questioning your beliefs and seeking alternatives that may challenge your point of view.
How to Avoid the Noise and Protect Your Money
In an era where anyone can share financial opinions online, discernment is a valuable asset. Verify, question, and when in doubt—consult a professional who is committed to your financial well-being.
In the end, just because a social media account is popular doesn’t mean the information it presents is trustworthy. It’s completely fine to consume media because it’s entertaining but avoid allowing the advice you see to drive your financial decisions.
Not sure who to trust? An ongoing relationship with a credentialed, fee-only fiduciary advisor gives you a sounding board to evaluate outside financial advice. If you’re not bombarded by finfluencers, but your parents, kids or grandkids are, share this post with them.
Hello! I’m Saul, a wealth advisor and financial planning specialist at Allodium Investment Consultants, located in Minneapolis, MN. I am dedicated to helping our clients reach their financial goals by specializing in investment strategies and comprehensive financial planning. When I am not advising clients, you will find me spending time with my wife, Khara, and daughter, Brielle. We live on a hobby farm, which supports my love of gardening and cooking. I have also been a downhill ski racing coach and enjoy outdoor activities, including canoeing, camping and photography.
The information provided is for educational purposes only and is not intended to be, and should not be construed as, investment, legal or tax advice. Allodium makes no warranties with regard to the information or results obtained by its use and disclaim any liability arising out of your use of or reliance on the information. It should not be construed as an offer, solicitation or recommendation to make an investment. The information is subject to change and, although based upon information that Allodium considers reliable, is not guaranteed as to accuracy or completeness. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment.