Following a financial influencer? Consider these five tips

Do you look to social media for tips on managing your money or follow financial influencers?

These online personalities can attract large audiences with their engaging content, but their advice comes with risks. We’ll give you five tips to help you consume their content with caution.

By sharing short videos, infographics, and even memes, financial influencers, or ‘finfluencers’, are making it easier to understand topics, such as retirement planning and investing. And they’re using nontraditional channels, including Instagram, YouTube, and TikTok, to reach the next generation of investors. According to the Ontario Securities Commission, more than one-third of Canadians have made a financial decision based on advice from a finfluencer—and the results weren’t always positive.

While their social posts can spark curiosity and collective learning, a finfluencer’s advice may not have your best interests in mind. We’ll show you how to validate their credentials and help navigate common finfluencer risks.

Before you take the advice of any finfluencer, you’ll want to understand the risks involved. You can start with these five tips:

1.      Verify their credentials—Finfluencers may have millions of followers and thousands of likes on their posts, but that doesn’t necessarily make them credible. You’ll want to check their qualifications, which are usually in their account profile or bio. Some items to look for:

• Formal education in their area of expertise, such as finance, international studies, or business
• Relevant work experience, like with an investment firm, broker-dealer, or bank
• Financial licenses through accredited bodies like the Canadian Securities Institute or FP Canada
• Certifications, such as Certified Financial Planner (CFP) or Chartered Financial Accountant (CFA), which are globally recognized professional designations

Once you get their credentials, it’s time to do some quick cross-checking. For employment and education, you can look them up on professional sites such as LinkedIn. If someone claims to be a financial advisor, you can use the National Registration Search for confirmation. You can even check for any past disciplinary actions online.

2.     Read the disclosures—Finfluencers may have their own biases, whether they’re intentional or not. Be sure to read their general disclosure, a paragraph that’s usually posted on their account profile or bio. Here’s how to spot potential conflicts of interest:

• You see the hashtags #ad, #sponsored, or #partner in the post—which usually means the finfluencer was paid to promote the content you’re seeing.
• You’re offered a discount code to purchase something on another site—the finfluencer earns commissions on any sales or click-throughs made from their post to the affiliate’s site (also known as affiliate marketing).
• You see advertisements—companies are willing to pay finfluencers ad revenue to reach their millions of followers, which could influence what content you’re seeing.
• They personally own the investments they’re talking about—and would financially benefit if you also owned them.

3.     Be wary of missing information—Not every finfluencer who gives investment recommendations includes any form of disclosure—but reputable businesses do. Use caution if you’re getting investment advice, but you can’t find any disclosures, or they’re hard to understand.

4.     Consider multiple sources—Finfluencers tend to oversimplify complex financial terminology to fit the short format of social media. To get a more comprehensive view, consider multiple sources. Ask a family member, friend, or financial professional for advice. Most retirement plans usually offer educational resources and tools to help you budget and save for retirement.

5.     Use your common sense—According to the Government of Canada, investment fraud is one of the most-reported types of fraud. Unfortunately, financial advice on social media isn’t globally regulated. Use caution if a finfluencer promises you quick wealth or wants your money up front. If it sounds too good to be true, it probably is.

Common sense, plus a little fact-checking, can help you navigate the new digital world of investment advice. Before you take advice from a finfluencer, verify their credentials, understand the risks involved, and consider how their advice aligns with your long-term goals. For a personalized strategy on how to save and invest for retirement, you may want to seek the advice of a licensed financial professional.