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Social media has transformed the way we consume information. People already turn to sharing platforms in increasing numbers for health and beauty products, home improvement ideas, and fitness programs.
But TikTok for investment advice? Instagram for financial commentary? Facebook for guidance on personal finances? Finfluencers are making this a reality.
As improbable as it may seem, over 18 million UK adults say they trust the financial advice shared with them on social media (Skipton Building Society, 2021). The potential for disaster is significant. Yet it seems that economic hardship, snappy digital formats, and charismatic personalities have combined to create a generation that follows unregulated channels, makes quick decisions, and acts on unchecked advice.
Generations of Financial Consumers
Each generation has its own relationship with information gathering.
Baby boomers were defined by a rapidly growing post-war economy, learning to spend and save wisely. Describing themselves as hard-working team players, with a largely collectivist ideology, they often prefer to visit trusted company websites to find information. They’re not immune to the lure of information on social media, but they’re also more likely to get advice from the brands they’ve always relied on. It’s not insignificant that 83% of surveyed boomers feel confident managing their money (Investopedia, 2022).
Meanwhile, Gen X (born between 1965 – 1980) operate on a high level of financial stress. Shouldering the burden of caring for elderly baby boomers, whilst simultaneously raising millennials, this group find it difficult to manage their finances. Many of them rely on employers to provide financial guidance and wish there was more available to them. Their consumption habits are governed largely by status, framed within the context of meritocracy and long periods of political transition. Gen Xers are not averse to the convenience of digital finance apps, but they prefer the one-to-one advice a professional can offer when it comes to decision-making.
Despite having more exposure to the digital world growing up, Millennials (born between 1980-1994) are even less trusting of information found online. This generation is more likely than either of the previous two to engage a financial adviser. Against a backdrop of global stability, Millennials take their finances very seriously, focused on early retirement and reaching financial goals. They are motivated by experience and the freedom money can provide under prudent financial planning.
Gen Z and the Search for Truth
Gen Z (born between 1995-2010) are the true digital natives, having never known life without the internet.
With a refusal to be defined in any particular way, this generation thrives on the idea of multiple realities, fluid identities, and living life pragmatically.
The quest for the truth behind individual expression and community makes them naturally sceptical of institutions and conventional information sources. They want personalisation and openness all at once.
In short, younger generations want to make connections and get behind causes that impact the world. They wholeheartedly believe that dialogue is the cornerstone of conflict resolution. With these belief systems, they have come to rely on personalities for information rather than the faceless brands of conventional marketing.
Why social media?
The advice gap
Referring to a lack of affordable financial advice, it’s reported that over the last year, only 8% of Britons have received advice from a regulated adviser. According to Boring Money’s Advice Report 2022, the ‘advice gap’ contains 13.2 million people.
Format and Accessibility
Social media platforms give instant access to a world of information and opinion. Users can quickly find financial advice, tips, and discussions from a wide range of sources. Platform algorithms quickly learn what a user is interested in and present it to them every time they log in. Without having to search, consumers see the content they want on a platform they’re already using – often in 30-second, easily-digestible snippets of information.
Inclusivity is the overriding driver of Gen Z. Building communities online that allow for the free sharing of information across the financial sphere. Access to expert voices has made these platforms the medium of choice for financial advice. Users can discuss and debate issues while providing a support system for each other. There is huge value for them in validation and different perspectives. The wide range of diverse voices available on social platforms gives insight where traditional financial institutions do not. People can connect with others who have similar financial goals and learn from each other’s experiences.
Influencer and Expert Content
Following the trend of almost every other aspect of life, prominent voices are now online giving out personal finance and investment advice. These have been dubbed ‘finfluencers,’ amassing millions of followers by offering tips, advice and insights on a wide range of financial topics. Whether through engaging content alone or riding the wave of a success story, finfluencers are becoming many people’s go-to for guidance on big financial decisions.
The Rise of Finfluencers
Finfluencers are becoming so popular that they’re becoming their own segment of social media. So much so, that the space financial advice occupies on TikTok has been dubbed ‘FinTok’. Here, users follow hashtags related to investment advice (#StockTok), or personal finances. Areas of each social media platform can now receive advice and tips on everything from budgeting to mortgages. Some of these accounts are run by regulated companies embracing a new way of communicating with young people. However, some aren’t regulated at all and have still attracted a huge following online.
With Gen Z having a reported 8-second attention span (Vizcaya-Moreno and Pérez-Cañaveras, 2020), short-form videos and tiny snippets of information are becoming the preferred way of simplifying and digesting complex ideas. Online advice from individual experts isn’t an entirely new trend. Martin Lewis of Money Saving Expert has become one of the nation’s most trusted personalities. His name is synonymous with exposing shortfalls in the financial system and offering clear, uncomplicated guidance to those who need it. But finfluencers take that one step further with rapid-fire content designed to deliver financial education alongside content made for entertainment.
Finfluencers have addressed a gap so far largely unaddressed by financial institutions – demystifying finances with informative commentary in a consumer-oriented format. In short, they’re speaking a language the younger generation understands.
Finfluencers and the Potential for Harm
The glaringly obvious worry with obtaining financial advice from finfluencers is discerning whether that advice is sound. And even more complicated, whether that advice is appropriate for everyone viewing it. Financial advice is rarely one-size-fits-all and this kind of blanket marketing removes the opportunity to tailor advice to an individual’s situation before they make a decision.
The concern has recently prompted the FCA to impose new rules around the promotion of financial products online. Using these criteria, it has so far removed over 5000 unsuitable financial promotions from FCA-regulated firms. It has also released new resources for finfluencers to easily determine whether they’re falling foul of the law with their content, reiterating that the promotion of financial products – including cryptocurrency – is carefully monitored.
In order to keep up with ever-growing trends, the financial services industry cannot hide from technology or the way people are now consuming information. The key to reaching audiences in 2023 lies in offering something purpose-built and personalised – understanding how the information chain has changed and how it can be used to improve the lives of customers across the UK, helping them to reach their goals.