Why You Shouldn’t Get Financial Advice from TikTok
In recent years, the digital landscape has witnessed the meteoric rise of ‘finfluencers’. Short for financial influencers, finfluencers deliver online content related to investments, personal finance, and economic or market trends. While they have democratised financial knowledge and inspired many to take control of their financial futures, the phenomenon also carries significant risks, especially for Australian expats.
The Emergence of Finfluencers
Finfluencers emerged as a powerful force in the financial world. Capitalising on social media’s vast reach, these influencers have gained large followings, often presenting themselves as relatable and knowledgeable voices in a complex financial landscape.
Positive Impacts
Firstly, it is important to acknowledge the positive aspects of finfluencers:
- Access to Information: Finfluencers have made financial information accessible to a broader audience, offering insights on budgeting, saving, investing, and more.
- Engagement: Their engaging content has sparked interest in financial literacy among younger demographics, who traditionally might not have been inclined to learn about personal finance.
- Community Building: Finfluencers create communities where followers can discuss and share financial strategies, fostering a sense of camaraderie and shared experience.
Negative Impacts
Despite these positives, the rise of finfluencers presents several challenges and risks of getting financial advice from TikTok, Instagram, Facebook and other social media platforms:
Unregulated Advice
Australia strictly regulates financial advice to protect consumers. To give general or personal advice, financial advisers must register with ASIC. You can find them on the Financial Adviser Register on the ASIC website.
Finfluencers often are not registered and operate outside these regulations. Often, they illegally provide financial advice without the requisite education, oversight, accountability or ethical guidelines imposed on registered advisers. This can expose Australians to unqualified advice and increase the risk of financial harm.
Misleading Information
Not all finfluencers possess formal financial education or certifications, and many disseminate inaccurate or misleading information. Followers may make investment decisions based on advice that lacks proper grounding or research, potentially leading to financial losses. This is especially impactful for expats, who require advice that considers their unique global circumstances.
Over-Simplification of Complex Concepts
Financial matters are inherently complex, yet finfluencers often simplify them to make their content more digestible. This oversimplification can result in followers misunderstanding the intricacies of investments, risks, and returns, which can have detrimental consequences.
Promotion of High-Risk Investments
Many finfluencers promote high-risk investments such as cryptocurrency, forex trading, or speculative stocks. While these can offer substantial returns, they are not suitable for many investors, particularly those with low risk tolerance or limited financial knowledge.
Conflicts of Interest
Finfluencers often earn money through sponsorships, affiliate marketing, or by promoting specific financial products. This can lead to conflicts of interest, where the finfluencer might prioritise their own financial gain over providing unbiased advice. Australian expats need to be cautious about the motivations behind the information they receive.
Lack of Personalisation
Financial information from finfluencers is typically generalised and does not consider individual circumstances. Australian expats, who may have unique financial situations, tax obligations, and investment goals, might find that the advice provided by finfluencers is not suitable for their specific needs. Personalised, professional financial planning is critical for making informed decisions appropriate to your situation.
Scams and Fraud
The anonymity and reach of social media platforms make them fertile ground for scams and fraudulent schemes. Some finfluencers may not have the expertise they claim or might be involved in fraudulent activities. Australian expats need to be vigilant and verify the credibility of the finfluencers they follow, especially given the global nature of social media.
Steps to Mitigate Risks
To protect yourself from taking on-board financial advice from TikTok and other social media platforms, take the following steps:
- Verify Credentials: Check if the finfluencer is a registered financial adviser with ASIC, meaning they have the relevant qualifications, background and experience.
- Cross-Reference Information: Verify the information provided by finfluencers with reputable sources and seek professional guidance if necessary.
- Understand Risks: Fully understand the risks involved in any investment decision before committing funds.
- Personal advice warning: Understand that only registered financial advisers can provide personal advice, which considers your personal financial situation and personal goals and objectives. Ultimately, any advice that does not factor this in may not be appropriate for you.
- Sanity-check: Do not assume that the information is correct based on the number of followers or likes someone has. Always trust your instincts and do your own research when it comes to taking advice from social media, no matter how credible it seems.
Final Thoughts on Finfluencer Risks
Finfluencers have democratised access to financial knowledge and engaged new audiences, but Australians must not overlook the potential negative impacts. It is essential for followers to critically assess the information they receive. Also verify the credentials of finfluencers, and understand the risks involved in their financial decisions. Therefore, it is advisable for Australian expats to consult with a specialist licensed financial adviser, who understands their unique circumstances and can provide tailored personal advice.
Contact Us
At Atlas Wealth Group, we specialise in supporting Australian expats with cross-border tax planning, superannuation, and wealth management. Contact us for a free consultation tailored to your personal situation.
We are the only Australian financial advice firm that holds both an Australian Financial Services Licence from ASIC and a licence from the Dubai Financial Services Authority (DFSA).
Relevant Information
- Top 5 Tips for an Australian Expat Choosing a Financial Adviser
- How Australian Expats in Dubai Can Secure Regulated Financial Advice
- Stay up to date and check out our weekly Expat Chat Podcast.