Why You Should Avoid TikTok & Instagram when Looking for Financial Advice

One of the most profound societal generational changes has been the rise and near ubiquity of social media in our lives.

To take one example, in the last 4 years alone, TikTok attracted an average of 340 million new active members each year. The social media giant has become one of the biggest video-sharing platforms in the world, catering for every niche pursuit and interest.

Whether you’re looking for reading inspiration, tips on flower arranging, or the latest dance craze, TikTok will have channels you can follow. It is perhaps no surprise therefore, that there has been a rise in content providers – often called “finfluencers” – sharing money tips and advice on TikTok. They are also prevalent on other channels from X (Twitter), Instagram, and Facebook.

Recent research from Deloitte showed that more young people are turning to social media than their bank for financial guidance.

While there are some professionals providing genuinely useful tips on TikTok and other social media, it’s also been recognised as a channel for dangerous and potentially harmful information when it comes to reliable financial advice.

We present five key reasons why you should not take financial planning or investment advice from TikTok (or other social media), and why working with a professional can pay dividends. In fact, don’t just take our word for it, the Dutch financial regulator, the AFM (Autoriteit Financiele Markten) has undertaken its own extensive research into this area, and as a result published guidance to protect individual investors, and issued warnings against unregulated people operating in this highly regulated field. You can read what the AFM had to say about it here.

1. The person in the video may not be regulated or accredited

One of the key issues to consider is that many online influencers will not be authorised or regulated to provide any form of financial advice.  this means they may also have not undertaken any professional study or received any recognised accreditation.

In the EU, individuals and firms must be licensed and overseen with a financial regulator. In the Netherlands this is the AFM, and the Dutch Central Bank, the DNB (www.dnb.nl). They not only set a high standard of professionalism, they also ensure consumer protection by ensuring those providing advice are appropriately qualified to provide investment advice, and that adequate protections are in place, such as professional indemnity insurance.

It’s unlikely that finfluencers will have taken the relevant exams and obtained the qualifications needed to provide regulated advice. So, if you act on advice you view on social media from an individual who is not authorised and regulated by the AFM or similar EU regulator, you do so in the knowledge that they might not have the necessary knowledge and expertise to back up their assertions.

Black Swan Capital holds an investment firm license from the AFM, and under the EU single market, this license has been approved for every country in the EU.

 2. The information could be misleading

If individuals sharing financial planning and investment advice on TikTok and other social media channels are not authorised and regulated, the information they provide may not be accurate.

If you’re making important decisions with your finances – that can underscore your security now and in your future – you need to do so in the knowledge that any suggestion that you read or hear is accurate.

While the AFM and other EU regulators have rules that regulated individuals and firms must follow when providing financial information, the vast social media landscape means it is not realistically possible for every post to be checked.

This became such an issue in 2021 for TikTok that the platform banned all investment promotions. And, in the US, the Securities and Exchange Commission has fined high-profile stars such as Kim Kardashian and Logan Paul for misleading financial promotions.

Even if it is not deliberately misleading, it could be out of date. Many finfluencers base their content on their often limited investment experience, and on particular ways they claim to have made money. If they are sharing a specific investment or trade, if it was genuine it is probably too late, as the market will likely have moved. The unregulated finfluencers try to operate on the FOMO principle appealing to our fear and greed responses. Neither are good foundations for making important financial and life decisions.

While there may be factually correct information on TikTok, the most sensible course of action is to instead seek advice from genuine professionals.

3. It’s not personalised advice

By the law of averages, some of the financial tips and advice being shared on social media may be correct. However, even if it is accurate, it does not mean that whatever an influencer is suggesting is appropriate for your unique circumstances.

Decisions around your financial life should be bespoke to you, factoring in elements such as your objectives, cash flow, risk profile, asset position and likely changes to your life among other factors.

If you simply follow investment advice on social media, you could end up making choices that are not tailored to you as an individual. This could have a serious and negative impact on your future.

4. The person may be receiving financial incentives to promote certain content

When finfluencers and social media channels share videos online, they may be financially incentivised to promote certain content. This is a conflict of interest.

Many influencers may promote sponsored content from which they receive a payment when you follow their affiliate links, rather than offering useful, constructive advice.

Individuals using this strategy will not be interested in what is best for you and your wealth, unlike a regulated investment firm that is impartial. A regulated professional will always give you the right advice, not the option that will help them and their earnings.

Further, under the Dutch financial regulations, which apply to Black Swan Capital across the whole of the EU, it is illegal to receive any remuneration or incentive from any product provider. We believe this is how it should be.

5. It could be a scam

A UK report in FTAdviser early in 2024 revealed that, in 2022, UK consumers lost £75 million to financial scams on social media. And, the average loss on TikTok was an eye-watering £138,472 – higher than all the other platforms.

Criminals are coming up with increasingly sophisticated fraud, with many hosting content and linking to websites that look entirely genuine. They could then either steal your personal data, or financial details, and leave you out of pocket.

When viewing financial content on TikTok, always consider that it could be an elaborate scam. Working with a regulated professional gives you the peace of mind that your finances – and data – are safe.

You should always consider the adage that if it seems too good to be true, it probably is.

Get in touch

If you’re seeking professional, truly independent advice from regulated professionals, reach out to us at Black Swan Capital. You can contact us at info@blackswancapital.eu and we will be happy to assist you.