Over the past few years, the landscape of investments, investors, and financial advice has changed quite significantly. Gen Z is the first generation to truly grow up on the internet, so it makes sense that they are almost five times more likely to seek financial advice on social media than older generations. Their answer: Finfluencers.
What are Finfluencers?
The term “finfluencers” refers to influencers generating content on financial topics on social media platforms. Pop financial advisors have been around for a while — think Dave Ramsey or Suze Orman — but social media has allowed personal finance creators to take off at a speed that was not possible before.
Social media influencers are content creators that have amassed huge followings during the rise of social media. Many have relationships with various brands and receive goods or compensation for endorsem*nts and product/service mentions on their social platforms.
Finfluencers are a specific type of influencer who focuses their content on personal finance, investing, and other financial topics. These creators often have streamlined landscapes of content including videos, social media presence, podcasts, and often even their own workshops/education content that people can pay to use.
Rise of The Finfluencer
Younger generations have been forced to engage with financial topics their whole lives in a way previous generations did not. The oldest members of Gen Z have lived through 3 (coming on 4) recessions and face surging rent and home prices, rising inflation, a student loan debt crisis, and a challenging job market.
A global pandemic forced everyone indoors, resulting in more screen time for practically everyone. At the same time, a surge of retail investing and frenzy around meme stocks took off with a primarily Gen Z and Millennial audience. These two factors, paired with a more financially conscious younger generation, helped catapult Finfluencers.
Gen Z also holds a different value set when consuming nvestment options and discussing financial goals. Finfluencers have created more personalized, less stuffy, and more fun communities than typical meetings with your financial consultant. Especially as Gen Z inherited a lack of trust in old-school financial institutions.
A survey from LendingTree found that around four in ten Gen Z-ers go to TikTok for investment information compared to just 15% of Millenials.
FinTok: TikTok’s Finance Community
While you might think of TikTok as an app for teenagers to watch viral dance trends and promote their music, the social media app now has over 20 billion global users looking for every kind of content.
TikTok has a reputation for promoting volatile cryptocurrencies and activist investing in the financial services world. But, beyond Dogecoin and GameStop content, there are many creators focused on providing practical personal finance videos to teach young people how to use and save their money better.
Content tagged #stocktok has been viewed by users over 2.7 billion times, while #PersonalFinance has more than 6.6 billion views. Videos under this tag cover topics ranging from IRAs, real estate, budgeting, and debt.
How Much Do Finfluencers Make?
A study conducted by CMC Markets analyzed TikTok profiles to determine how influential and profitable financial content creators are on the app. On TikTok, the cost of one post can range from $2,500 to $20,000 depending on the video’s virality and the creator’s follower count.
One Finfluencer who has been pretty transparent about how much income he gets from finance content is Andrei Jikh. Jikh posted a video in December 2021 detailing each of his income streams where he reported bringing in $187,525 from sponsorships, $1.16 million from ad revenue, and $1.75 million from affiliate revenue.
Of course, not all Finfluencers are coming out as millionaires, but many are making enough to leave their analyst roles at big banks and survive on content alone. Bloomberg even reported in September 2021 that many previous Wall Street analysts had left their firms to make content because it’s more profitable.
Risks of Finfluencers
Many regulators and financial experts are concerned about the dangers of such easily accessible financial advice. TikTok and other social media platforms provide a low barrier of entry to begin giving advice that may be viewed hundreds or thousands of times.
A TikTok spokesperson told the Guardian “our guidelines make clear that we do not permit content that brings about financial or personal harm and we have specific rules banning pyramid, Ponzi, or similar schemes.” The company has rolled out a #FactCheckYourFeed campaign and a PSA tagged on financial advice videos reminding viewers that investments involve risks.
Regulatory Concerns
The main law that governs these creators is the Investment Advisers Act of 1940, which specifies what qualifies as investment advice, who must register with state and federal regulators in order to provide it, and what standards govern the advice.
There is one exemption to this Act that reduces the risk to influencers: individuals are exempt from registering and can dispense financial advice if they do so through a “publication of regular and general circulation.”
In August 2022, the North American Securities Administrators Association (NASAA) issued an Informed Investor Advisory recommending investors use caution when considering advice from social media financial influencers, and courts have not determined the reach of what constitutes a “publication of regular and general circulation” as applied to finfluencers.
The advisory includes information to help investors better understand how influencers work, what to consider when coming across financial advice on social media, and red flags to consider when watching financial content.
Outside of the US, the Australian Securities and Investments Commission (ASIC) released an information sheet in spring 2022 warning that creators who offer financial advice without a license can face hefty fines and five years in prison.
Bottom Line
As more young people are turning to TikTok and social media in general for not only entertainment but news, information, and advice, the rise of financial influencers was bound to happen. The rise of these creators has made talk about money far less taboo by creating productive conversations about income, savings, retirement, and debt.
However, not all advice found online is going to be quality. Providing a deep dive into how crypto works and covering basic financial literacy topics is different from telling viewers exactly what to purchase on the stock market.
This material is provided for informational and educational purposes only. It is not intended to be investment advice and should not be relied on to form the basis of an investment decision.
As a seasoned financial expert with a deep understanding of the evolving landscape of investments and financial advice, I have witnessed firsthand the transformative impact of social media on the way individuals, particularly the younger generation, engage with financial topics. Over the years, the emergence of a new breed of influencers known as "Finfluencers" has reshaped the dynamics of financial education and advice dissemination.
Finfluencers, short for financial influencers, are individuals who leverage social media platforms to create content specifically centered around personal finance, investing, and various financial topics. This phenomenon has gained significant momentum, particularly among Generation Z, who, having grown up in the digital age, are almost five times more likely to seek financial advice on social media than older generations.
The rise of Finfluencers can be attributed to the unique combination of factors, including the internet's pervasive influence on Gen Z, the surge in retail investing, and the financial challenges faced by younger generations, such as recession experiences, surging rent and home prices, student loan debt crises, and a challenging job market.
TikTok, a popular social media platform, has become a significant hub for Finfluencers, giving rise to what is colloquially referred to as "FinTok." With over 20 billion global users, TikTok has provided a platform for Finfluencers to reach a massive audience. The platform's finance community covers a wide range of topics, from practical personal finance advice to discussions on volatile cryptocurrencies and activist investing.
The financial success of Finfluencers is also noteworthy. A study conducted by CMC Markets found that the cost of one TikTok post from a Finfluencer can range from $2,500 to $20,000, depending on factors like virality and follower count. Notable Finfluencers, such as Andrei Jikh, have disclosed substantial income, with multiple revenue streams including sponsorships, ad revenue, and affiliate revenue.
However, the rise of Finfluencers has not been without its challenges and concerns. Regulators and financial experts have raised alarms about the potential dangers of easily accessible financial advice on social media. The Investment Advisers Act of 1940 governs these creators, and exemptions exist for those dispensing advice through a "publication of regular and general circulation." Regulatory bodies, such as the North American Securities Administrators Association (NASAA) and the Australian Securities and Investments Commission (ASIC), have issued advisories cautioning investors about the risks associated with financial advice from social media influencers.
In conclusion, the emergence of Finfluencers represents a paradigm shift in the way financial information is disseminated and consumed, particularly by younger generations. While these influencers have created more accessible and engaging platforms for financial discussions, the regulatory landscape and concerns about the quality and potential risks of advice are challenges that both influencers and their audience must navigate. As financial enthusiasts, it is crucial for individuals to approach online financial advice with discernment and awareness of potential pitfalls.
