The advent of social media and streaming sites such as YouTube have made it possible for anyone with an opinion to share content. Every topic imaginable has attracted commentary, clicks and followers; including weightier topics, such as finances.
However, not all information is reliable, and many consumers have lost money due to scams or simply inappropriate advice. We explore how to tell if financial information can be trusted, and the steps you can take to safeguard your money.
Tip: Your credit score is a reliable indication of your ability to access credit. View your credit score today.
The dangers of user-generated content
Anyone from financial advisers to unqualified “finfluencers” (financial influencers with a large following) can share financial information online and potentially reach a large audience.
This presents a hazard if you’re looking for money guidance. Only registered financial advisers are qualified to provide financial advice, under strict regulation by the Financial Sector Conduct Authority (FSCA), per the Financial Advisory and Intermediary Services (FAIS) Act 37 of 2022.
Although people look to influencers to provide “free” advice online, this should come with a health warning, cautions educator Maya Fisher-French, author of Money Questions? Answered!
“An influencer simply isn’t qualified to answer a question like ‘Where do I invest R100,000 to get the best return?’ on social media,” she says.
Is there a place for finfluencers?
Finfluencers can prove useful under certain circumstances, however, says Fisher-French.
“The Financial Independence, Retire Early (FIRE) movement has driven finfluencer growth and has motivated people to take control of their money, which is great. However, finfluencers should clearly indicate if someone’s paying them, using hashtags such as #partnered or #sponsored,” she notes. “If this isn’t done, it creates mistrust among followers as it can be deceptive.”
One of the strengths of finfluencers is their ability to package information in an entertaining and inspiring way, says Sylvia Walker, the author of Smartwoman: How to Gain Financial Independence and Create Wealth.
“However, they may not always fully understand what they’re sharing, and may provide incorrect, shallow, or biased advice. Unfortunately, there’s no way the average person can tell at face value which online content is legitimate and which isn’t.”
In addition, unethical finfluencers may promote cryptocurrency schemes as a means of attaining instant wealth, which is “sexier” than saving diligently, says Adele Barnard, senior financial planner and investment specialist at Sanlam.
A spate of cryptocurrency scams fronted by celebrity influencers shows how their followers can be persuaded to part with cash.
“It’s always safer to follow finfluencers who work for reputable financial brands that have a good track record – and to avoid crypto schemes as most are scams,” she says.
The benefits of qualified financial advice
Finfluencers may address one facet of financial health, such as investing, but they can’t offer holistic advice. “They may recommend investing R1,000 in unit trusts, but this might be better invested in life cover if you have a family depending on you,” Walker points out.
Financial planner and money mentor Terence Tobin says finfluencers may offer good tips, such as paying off your debt and maximising contributions to your tax-free savings account.
“That said, it’s best to run these ideas past a financial adviser, who can put together a financial plan based on your personal needs and circumstances,” he notes.
Walker says you have no legal recourse if you part with your hard-earned cash because you watched a clip on Tiktok or Instagram. “Advice laws in South Africa are there to protect the consumer, so it’s prudent to protect yourself and work with someone licensed,” she says.
A list of registered financial advisers can be found on the FSCA’s website.
Tip: Did you know a tax-free savings account (TFSA) is an investment tool whose returns attract no taxes?