The dangers of receiving financial advice from “finfluencers”

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BOITUMELO NTSOKO: Social media has been a game changer in communication and information sharing, and platforms like TikTok, YouTube, and Twitter have become popular avenues for people seeking free financial advice. This has led to an increase in “finfluencers” promising great advice to help you achieve financial freedom. However, it can be dangerous to take money advice from social media and “finfluencers.”

So how do we separate financial fact from fiction on social media and is there a way to use it to our advantage? Thulisile Nkomo, who is a private wealth manager at NFB Private Wealth Management, joins us in this episode to help us navigate this topic. Welcome Thulisile.

THULISILE NKOMO: Thanks for hosting me, Tumi.

BOITUMELO NTSOKO: Thuli, why do you think people are turning to social media for financial advice?

THULISILE NKOMO: Social media offers a free service to users and people may find it attractive as they may not want to pay for the professional services of a financial advisor. As a result, they are turning to social media as an alternative to traditional financial advice. It’s also easily accessible because all you need is just your phone or a computer. So some people would rather do this than go find a financial advisor or make an appointment with a financial advisor.

You find that some content creators have a financial background and experience in the finance industry, so people warm up to them. I often find social media content to be synonymous with instant gratification, which more social media users seek.

So most of the users relate more to it and also create a safe space to talk about money because if we look back to the past, talking about money used to be seen as a taboo.

And for people who don’t come from a background where they have it [others] they can talk about money, it helps to break those financial barriers because it gives them access to people talking about money on the internet.

BOITUMELO NTSOKO: And what are some of the dangers of accessing this advice on social media?

THULISILE NKOMO: Social media is democratised and the advice offered may be based on personal experience and may not necessarily suit individual needs, as financial advice is not a one-size-fits-all solution. Financial advice provided on social media may not be verified, so it is important that you do your due diligence and research the information you receive on social media about financial advice.

Sometimes the information is more emotional than logical. So, for example, when the market crashes someone can tell you, ‘Cash in… so you can avoid further losses.’

Also, some content creators post with their self-interest in mind, where it turns out they are biased because they are looking for “views”, trying to be popular, running a certain campaign, and being financially approved.

As a result, the intent may not actually be for your benefit as a user. And many content creators may not even have the skills or experience to offer professional financial advice.

BOITUMELO NTSOKO: Staying on this, can you give us an example, perhaps of bad financial advice that you have seen online?

THULISILE NKOMO: Some say: ‘It is always better to buy a house than to rent, because a house is a valuable asset’. This is not entirely true because the cost of owning a home goes beyond paying a bond. There are other ongoing costs of owning a home such as tariffs and taxes, levies, insurance, electricity and water. So the failure to make this consideration is what puts most homeowners in misery after realizing they can’t keep up with the monthly cost of owning their home.

BOITUMELO NTSOKO: And how can anyone separate financial fact from fiction?

THULISILE NKOMO: There are free websites similar to what Moneyweb offers, where qualified financial advisors offer their services by writing articles AND give information to the public.

You can also find it on an institutional website.

People can familiarize themselves with that content, and through that, they will be able to figure out fact from fiction because, if you look, there are so many content creators out there that it becomes very complicated to decide what information to follow.

So the safest route to take would be to seek out services or a professional financial advisor, or you can always ask a friend or family member to refer you to a financial advisor they have dealt with.

So that would be a key move to make.

BOITUMELO NTSOKO: Thuli, do you think “finfluencers” should be required to be licensed or regulated in some way to ensure they are held to a certain standard of conduct?

THULISILE NKOMO: Essentially, to provide any form of financial advice to an individual, you must be a representative of a licensed financial services provider [that is] registered with the FSCA [Financial Sector Conduct Authority].

You must have a certain qualification; you must have experience and product information.

So influencers should rather go a similar route because the issuance of a license will paint a full picture that they are qualified to offer financial advice, while in reality [if they haven’t done this] they are not.

Influencers do not take responsibility for the advice they offer.

Therefore, if individuals suffer financial loss as a result of financial advice received online, the user will have no recourse.

Self [the person is] authorized to make recommendations, they will provide accurate recommendations and will be accountable in terms of the content they create for their users.

BOITUMELO NTSOKO: What role do you believe influencers play in shaping the financial literacy and literacy of the next generation?

THULISILE NKOMO: Financial influencers definitely challenge most social media [users] pay attention to your finances.

They create, well, awareness about financial literacy and also help financial literacy in general because some people may not have the know-how [in terms of] finances.

So they really help in that space.

BOITUMELO NTSOKO: Before we wrap up, do you have any final advice for our listeners regarding accessing financial advice on social media? Is there a way for them to use these platforms to their advantage?

THULISILE NKOMO: Financial information and advice [matters] is instantly available on all social media.

So before following one, make sure the source is reputable and sticks to your personal financial situation. Make use of articles published by reputable financial firms, instead of opinion pieces written by unqualified people.

It is advisable to seek the services of a financial advisor because they offer unique advice for your personal financial situation.

You can use social media to your advantage to take some of these questions to your financial advisor and ask, “How does this affect me and my personal plan?”

So for me, I just feel that decisions about money shouldn’t be made from a three minute video you find online.

Instead, take your time to actually research a solution that’s right for you, because the services we provide as financial advisors are tailored to an individual and we take a lot of information into consideration – such as your time horizon – if you’re looking to make an investment. . What is your tax profile? What is your risk profile? What are your cash constraints, fears and understanding of financial literacy? And we also hold you accountable for the decisions you make.

So we actually become your partner in achieving your personal goal, instead of just looking for online popularity and views. So that’s what I feel is most important.

BOITUMELO NTSOKO: Thanks so much for joining us on this episode, Thuli.

THULISILE NKOMO: Thanks Tumi. It was nice being with you.

BOITUMELO NTSOKO: That was Thulisile Nkomo, who is a private wealth manager at NFB Private Wealth Management.

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