In the evolving world of finance, the rise of social media has heralded a new era where traditional financial advice intersects with digital dissemination. As more people in the UK turn to online platforms for financial guidance, it becomes essential to understand the difference between financial influencers and traditional financial advisers. This blog explores current trends, benefits, and considerations surrounding both.
The Rise of Financial Influencers
Financial influencers, often referred to as ‘finfluencers’, are individuals who use social media platforms like YouTube, Instagram, and TikTok to share financial advice and insights. They typically attract a younger audience, appealing to those who prefer quick, digestible content.
Key Trends:
– Democratisation of Finance: Financial influencers have democratised financial knowledge, making it more accessible to the public. They simplify complex financial jargon into more engaging content.
– Platform-Based Advice: Different platforms cater to varying depths of information. For instance, TikTok might offer quick tips, whereas YouTube could provide in-depth tutorials.
– Influence on Investment Trends: Influencers can sway market movements by promoting certain stocks, cryptocurrencies, or investment products, often leading to volatile swings in young investors’ portfolios.
The Traditional Role of Financial Advisers Financial advisers in the UK are professionals who provide personalised financial advice to their clients. They are typically regulated by the Financial Conduct Authority (FCA) and are required to possess specific qualifications.
Key Trends:
– Increasing Specialisation: More advisers are specialising in specific areas such as retirement planning, tax, or wealth management for high-net-worth individuals.
– Integration of Technology: Many traditional advisers are incorporating robo-advisers and AI to provide more efficient services and better meet the needs of tech-savvy clients.
– Focus on Holistic Planning: There is a growing trend towards offering holistic financial planning services that consider all aspects of a client’s financial life, not just investments.
Benefits and Considerations
Financial Influencers:
– Benefits: Influencers provide free or low-cost information that is engaging and easy to understand. Influencers can also offer diverse perspectives and foster a sense of community among their followers.
– Considerations: The advice offered by influencers is not personalised and may not always be reliable. The lack of regulation can also be a concern, as there is minimal oversight to verify the accuracy of the information provided.
Financial Advisers:
– Benefits: Advisers offer personalised, regulated advice tailored to individual financial situations. They can navigate complex financial landscapes and provide long-term financial planning.
– Considerations: Engaging a financial adviser can be more costly, and the traditional approach may not resonate with younger clients who prefer digital interactions. However due to the increased regulation and reporting the cost of advice has created an “advice gap” where 80% of the population has no access to a financial adviser. Inevitably people will seek less formal sources of advice, potentially to their detriment.
The Risks of Influencers Promoting Stocks like GameStop (GME)
The GameStop stock phenomenon highlighted significant risks when financial influencers encourage followers to invest in volatile stocks. These actions can lead to market manipulation and substantial financial losses for individuals who invest without a clear understanding of the risks involved. They typically fail to provide the financial coaching that encourages a long term investment view, instead focussing on short term trading that almost always results in losing money. Timing markets is notoriously difficult. However due to the increased regulation and reporting the cost of advice has created an “advice gap” where 80% of the population has no access to a financial adviser. Inevitably people will seek less formal sources of advice, potentially to their detriment. Hence, the lack of accountability and potential for misinformation underscores the need for caution when following financial advice from influencers.
The Blurring Lines
Interestingly, the distinction between financial influencers and advisers is beginning to blur. Some influencers are obtaining qualifications to provide more reliable advice, while advisers are increasingly leveraging social media to reach a broader audience. With only 20,000 active qualified and regulated advisers in the UK any increase in the number is to be welcomed.
Conclusion
As the financial landscape in the UK continues to evolve, both financial influencers and traditional advisers play pivotal roles. Consumers must navigate these options carefully, considering their specific financial needs, the reliability of the source, and the type of advice they require. Whether choosing between an influencer’s tip or a professional adviser’s plan, critical evaluation and thorough research remain key to financial health.