With the advent of new video social platforms including TikTok and Snapchat, we have seen hundreds of novice financial advisors, otherwise known as ‘finfluencers’, emerge. These influencers offer Gen Zers money advice in a short, lighthearted video format
and are becoming an increasingly popular source of financial information. Even Imogen Tew, money reporter at The Times
tweeted about trying her hand at “going viral in the FinTok corner of TikTok”.
With only 16% of UK adults stating they are highly knowledgeable about financial matters, according to a study by the Financial Conduct Authority (FCA), there
is clearly work to be done by banks to improve how they educate their customers about money. The rise in finfluencers demonstrates that younger people are desperate to learn, but are these particular individuals really the best source of knowledge, and should
traditional banks look to embrace this platform as a way to attract and retain younger customers?
What are the drawbacks?
Several red flags could put off financial institutions from partnering with finfluencers. If you’ve seen any media coverage of these individuals so far, you’ll be aware of their strong association with risky investments and dubious share tips.
Platforms such as TikTok aren’t rigorously policed or regulated which means that the advice finfluencers are dishing out may not be correct. Furthermore, fraud is common, with some finfluencers impersonating another individual as part of a scam. Earlier
this year, the FCA warned that young people especially are engaging with risky investments like foreign exchange and cryptocurrency, a trend in part being driven by said ‘finfluencers’. Given that 26% of the platform’s users are aged between 18-24, they also
may not be as experienced in financial matters, and therefore may not be aware of the dangers of this type of activity. They are also more likely to fall for criminal tactics being used on these channels.
If we consider the goal of a finfluencer, most of the time they will be attempting to build their personal brand and audience through interesting and fun video content, with the ultimate aim of making a living as a financial influencer. With a large enough
following, companies will pay them to advertise on their TikTok posts. In theory, this all sounds legitimate and their advice could work, however, if they want to grow follower numbers, they are unlikely to be overly vocal about the dangers of investing in
cryptocurrency, for example. Nobody wants to hear about the doom and gloom of financial risk. Also, many finfluencers are self-taught and lack the industry knowledge of an experienced financial advisor.
Should banks engage?
That said, there are some fantastic finfluencers such as
Pennies to Pounds, run by Kia Commodore, which covers topics including Lifetime and Help to Buy ISAs, mortgages, budgeting tips and credit scores. For young people, these individuals could be crucial in promoting financial knowledge and products across
a range of finance topics like investment, budgeting, tax relief, such as the government’s working from home allowance, savings, discounts and more.
Young people are struggling to find quality financial advice. If banks can educate them on financial products in layman’s terms, it is a way to build trust and strengthen the brand. Therefore, traditional banks should absolutely team up with finfluencers
to better educate their younger customers about how best to manage their finances.
There are some caveats, however. Banks must not trivialise the information they are giving out on these channels, so the finfluencers they choose to partner with is important. They need to ensure they work with individuals that abide by the community guidelines
for each social media platform, to reduce the risk of videos being taken down. Information must be relayed by genuine financial experts – someone like Martin Lewis, for example - so that it comes across as serious and meaningful. Furthermore, by teaming up
with a reputable financial expert they will be viewed as a trustworthy brand.
Alternatively, rather than using a finfluencer to educate younger customers, banks themselves can set up their own TikTok channel and publish regular content on topics that matter most to Gen Zers. Challenger brands including Monzo and Revolut are already
doing this, therefore traditional players should also explore this option before it becomes another differentiator where they get left behind.
Finally, it’s not just banks that need to do more on these channels. Regulators need to get a handle on this growing trend before it becomes too difficult to manage. They must work more closely with the social platforms themselves to ensure it is a safe
place for young people to seek information about how to manage their money with confidence.