The rise of the finfluencer
Social media personalities dishing out financial advice to young adults presents both risks and opportunities
IN recent years, social media platforms have evolved into significant sources of financial advice for Generation Z. This shift has fuelled the rise of “finfluencers” or online influencers who specialise in financial counsel. Notably, top-tier finfluencers boast follower counts in the millions, eclipsing leading financial institutions.
According to a paper shared at the World Economic Forum, Gen Z is almost five times more likely to get financial advice from social media platforms than people aged 41 and over. There are benefits to this trend; experts say that responsible finfluencers can help raise financial awareness among young adults, many of whom are likely to require guidance in this area. A 2021 study by Citi Foundation and the Singapore Management University found that around 30 per cent of young adults are not confident about managing debt, and some 20 per cent find it hard to make ends meet.
“Young adults today are born in the digital age and we have to be pragmatic in recognising that they engage with information differently compared to the boomers or Gen X. With more financial awareness, one can be better informed to manage money matters,” says Julia Leong, partner specialising in regulatory risk and compliance, PwC Singapore.
Opportunities for businesses
Thio Tse Gan, financial services industry leader and cyber leader at Deloitte South-east Asia, highlights three ways in which businesses can capitalise on this trend. Firstly, finfluencers can bolster brand awareness and without selling directly by mentioning brands or products in their content. Finfluencers can also leverage their relationships with followers to help increase engagement and adoption when they endorse a product or brand.
Lastly, financial institutions and financial planners can adopt finfluencer strategies, or even engage finfluencers in their marketing, to educate and convert followers into customers. This would enable businesses to forge a deeper connection with the public, broaden their outreach, and adopt a more tailored approach in engagement strategies through analytical insights.
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“Social media has democratised access to financial education and personal finance, and finfluencers have made finance more accessible to the general public by sharing advice in bite-sized, easy-to-understand formats. As such, finfluencers can impact consumer behaviour and preferences,” says Thio, who is a member of CPA Australia.
“Businesses tapping finfluencers to drive effective engagement with their target audience will be able to leverage the finfluencers’ followers and utilise analytics to adopt a more targeted approach in their engagement strategies.”
Potential pitfalls
The trust Gen Z places in top finfluencers over traditional sources can, however, pose substantial risks. For instance, the proliferation of misinformation and a “get rich quick” mentality could lure individuals into risky financial ventures.
“The prevalence of misinformation, disinformation, and fake news on digital platforms is a significant concern. Gen Z should be educated to discern the authenticity of information on social media. Not all online content is reliable, and they need to recognise that even within the realm of finfluencers, there could be those with ulterior motives,” says David Gerald, founder, president and CEO of the Securities Investors Association (Singapore).
There is also the risk that finfluencers may lack adequate financial knowledge, or that they have potential conflicts of interest when sponsorships are involved. “Financial products are complex by nature. While finfluencers may do their best to explain such products in layman terms, not every financial product can be simplified, or have their values and risks fully disclosed due to the way they are structured,” explains Thio.
“Therefore, consumers need to be reminded to exercise cautious optimism and the need to seek professional financial advice, and ensure that they understand the product and its associated risks before purchasing it.”
Promoting financial literacy
To address these issues, industry watchers welcome heightened scrutiny by regulators, particularly concerning the promotion of complex or high-risk financial products online. For instance, in January 2022, the Monetary Authority of Singapore (MAS) prohibited digital token providers from advertising in public spaces and media to mitigate risks associated with cryptocurrency trading.
“Regulators should consider closer scrutiny of the promotion of complex financial products or high-risk products through online distribution and advertising channels more closely, given the potential for large financial losses they may cause the investing public,” says Thio.
Financial regulators have also been educating the general public on how to avoid scams by issuing warnings on suspicious activities. Already, some regulators in Asia have provided guidance on how finfluencers can avoid misleading consumers. In Singapore, MAS has warned social media content creators that posting false or misleading statements and activities may constitute market abuse and will be subjected to regulatory actions.
Beyond regulation, experts highlight the importance of general financial literacy as a counterbalance to the rapid proliferation of finfluencer content. “Gen Z and members of the public in general could be offered additional digital literacy training to recognise credible sources and discern between accurate financial advice and misinformation. They could also be taught to cross-check multiple sources of information before making financial decisions, and to seek advice from a professional or trusted individual if needed,” says Thio.
Gerald notes that it would be almost impossible to fully police online content, and agrees that investor education is the way to go. He says: “Strong emphasis should be placed on financial services firms to ensure that they focus on the quality and nature of their collaboration with finfluencers. Collaboration on educating users can be a priority.”
The rise of finfluencers reflects a broader shift in financial advisory services spurred by digital innovation. While it opens doors to new opportunities for businesses and financial education, it also highlights the importance of regulatory frameworks and financial literacy initiatives in ensuring that the finfluencer phenomenon is harnessed for the greater good, without compromising the financial security of the younger generation and the integrity of financial markets.
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