Finfluencers: Can we trust investment tips from social media?

Investment advice on YouTube, portfolio experts on Instagram: Finfluencers are promising rapid returns all over social media. But not all of them are financial experts. — dpa

DUSSELDORF: Investment advice on YouTube, portfolio experts on Instagram: Finfluencers are promising rapid returns all over social media. But not all of them are financial experts.

Financial influencers – or finfluencers – give investment advice on social media – and they have been all the rage on TikTok, YouTube and Instagram lately.

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A study by social media marketing analyst Hypeauditor found that finfluencers have experienced a real boom in recent years and are particularly popular among young people.

Annabel Oelmann, director of a German consumer advice centre, considers reputable finfluencers to be a good addition when researching investment options, but she also urges caution.

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Anyone with a social media account can publish advice – regardless of their actual level of expertise, she says.

If you are looking to learn the basics, YouTube or Instagram are a great place to start, as many financial influencers present topics in a simple and sensible way.

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But not all of them are reputable, warns Germany’s Federal Financial Supervisory Authority BaFin. Some aren’t financial experts, while others are even trying to trick users.

Healthy distrust is wise

Those are the influencers Marc Tüngler, managing director of the German Association for the Protection of Securities Owners, is hearing more and more about.

The phenomenon is not new, he says: Self-styled financial experts have always attracted those hungry for investment tips.

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"In bad stock exchange periods their promises are particularly effective. When the portfolio is in the red, some investors hope for a hot tip and stop trusting their own decisions," Tüngler says.

In order to establish whether a finfluencer is credible, you should try to find out who they are, whether they have worked in the finance and investment sector and why they are promoting this particular investment. Also check whether they are charging fees for their advice.

Warning signs

It also makes sense to follow several finfluencers to get a broad spectrum of opinions. According to Tüngler, you should be suspicious if a tip is too specific, advertising a particular product.

Alarm bells should also ring if a finfluencer is pushing a certain stock or cryptocurrency – perhaps while claiming it’s a secret tip.

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Oelmann advises following your gut instinct and also paying attention to any disclaimers.

“It often says at the end of the video that this is not advice or a recommendation, and that no liability is assumed. Accordingly, I would take the video as a kind of experience report or financial diary and nothing more,” she says.

Especially when it comes to the promotion of specific products or providers by finfluencers, the consumer advocate recommends getting independent, fee-based advice before you invest. – dpa

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