If you’ve ever turned to the internet for financial advice or recommendations, you are far from being alone.
A study reported by the World Economic Forum found that over 60% of US investors under the age of 35 use social media as a source of investment information.
And the trend of using the world wide web to search for financial wisdom is not confined to the young.
At the other end of the age spectrum, research reported by The Intermediary found that almost two-thirds (62%) of UK homeowners aged over 55 use online price comparison sites to demystify later-life finances.
So, the reports suggest that people of all age demographics are turning to online sources to find their financial advice. However, there are certain hazards associated with this approach, as well as missed opportunities.
Read on to discover the risks of finding all your financial advice online.
There are risks associated with following “finfluencers” and using price comparison sites
Financial influencers or “finfluencers” have become increasingly popular in recent years. While there are plenty of reputable sources, Martin Lewis being perhaps the best known, there is no guarantee of accuracy or impartiality among all finfluencers.
Remember also that Martin is a journalist and not a qualified financial planner!
Indeed, Reuters reports that nine people in the UK – several of who were well-known TV personalities – were recently charged for using their platforms and reach to promote an unauthorised investment scheme.
While this suggests that certain finfluencers have been held to account for their irresponsible actions, there is a wider issue of regulation and oversight, as many continue to operate with minimal accountability, potentially misleading their audiences.
Such misleading could stem from finfluencers having little to no financial accreditation or experience, or it could be driven by more malicious intentions.
According to a report from the World Economic Forum, in the first six months of 2023, the Federal Trade Commission reported losses totalling $2.7 billion from investment-related fraudulent scams initiated on social media in the US alone.
Though the data does not specify how many of those scams were directly linked to finfluencers, 37% of the losses were reported by investors aged 20-29. Given what is known about this demographic’s tendency to seek financial advice online, it’s likely that finfluencers played a role in a considerable number of these incidents.
While price comparison sites are unlikely to be directly associated with online scams or fraudulent activities, they do present their own set of pitfalls and limitations.
For instance, many companies don’t appear on price comparison sites, so relying solely on the information they provide can limit your options and potentially lead to missed opportunities for better deals or services.
Some sites may also prioritise sponsored listings or obscure certain fees, making it harder to find the best overall value. Additionally, price comparison sites often emphasise cost over quality, which can lead to subpar choices if you focus solely on the lowest price.
Neither social media finfluencers nor price comparison sites offer personalised advice
While you can find general financial tips from social media or recommendations from comparison sites, neither can replace the personalised guidance of a regulated financial planner.
Online advice will always be generalised and won’t address the specific nuances of your financial situation, leaving gaps that only personalised, professional guidance can fill.
Impersonal advice could also lead to misconceptions or oversights that could be costly in the long run. For truly effective financial planning, it is a good idea to seek tailored advice from a qualified expert.
How to protect yourself when seeking financial advice online
Whether you’re following advice from an online finfluencer or using a price comparison site to guide your decision, it’s a good idea to approach both with caution and consideration.
The following tips can help ensure you don’t fall prey to an online scam or miss out on wider opportunities:
- Check credentials and certifications – Before heeding the advice of a finfluencer, try to verify their background and qualifications. Look for recognisable accreditation or certification, such as FCA authorisation or a level four qualification in financial planning.
- Cross-reference information – Compare the information and advice offered by the online source with other reputable sources, like government websites or established financial firms.
- Avoid impulsive decisions – Investing your money can involves risk and following online advice can be particularly risky. Take the time to carefully evaluate and question the information you receive and try to avoid making impulsive decisions around opportunities that seem too good to be true.
- Expand your search – It is always a good idea to explore as many options as possible, so you don’t miss out on wider opportunities. So, if you’re using a price comparison site, expand your search beyond just one website to ensure you find the best possible option.
- Speak to a financial planner – For major financial decisions, it’s a good idea to consult a regulated financial planner who can offer you tailored advice based on your unique life circumstances, rather than generalised information.
To speak to a financial planner, get in touch.
Email info@blueskyifas.co.uk or call us on 01189 876655.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
