07 February 2024
In this extremely intersting report by the CFA Institute, "The Finfluencer Appeal: Investing in the Age of Social Media" authors Serena Espeute and Rhodri G. Preece, CFA, delve into the burgeoning influence of finfluencers (financial influencers) on young investors' decision-making processes. With the digital age empowering a new generation of investors, this research uncovers the pivotal role of social media platforms like YouTube, TikTok, and Instagram in shaping investment strategies among the youth, particularly those aged 18–25.
The report scrutinizes the finfluencer phenomenon, assessing its impact on financial education, inclusivity, and the traditional advice industry. It raises critical questions about the adequacy of existing policy frameworks in regulating finfluencer activities, the distinct attributes of finfluencer content, and the motivations behind Gen-Z's engagement with such content.
One of the core insights from the study is the dual-edged nature of finfluencers: while they offer engaging and accessible financial advice, they also introduce risks associated with misinformation and unreliable guidance due to low entry barriers. This calls for a concerted effort from professional advisers, compliance officers, and financial firms to foster a culture of compliance and responsible engagement to safeguard investors.
The report emphasizes the necessity for investment companies to equip finfluencers with compliance training and ensure transparency in sponsorships and content promotion. Moreover, it advocates for a unified regulatory approach to manage the cross-border challenges posed by social media, suggesting that regulators collaborate to standardize the definition of investment recommendations and actively engage with finfluencers to monitor compliance and address grievances.
Featuring primary research on 110 pieces of finfluencer content across YouTube, TikTok, and Instagram, alongside focus group interviews with young investors from the United States, the United Kingdom, France, Germany, and the Netherlands, the report offers a comprehensive analysis of the finfluencer landscape. It provides actionable recommendations for investment firms, regulators, and social media platforms, marking a significant contribution to the "New Generation of Young Investors, New Ways of Investing" research series by the CFA Institute Research and Policy Center.
The report also offers the “Tips for Young Investors: Engaging with Social Media Finfluencers” flyer, as well as the "Marketing and Compliance Primer: Hiring Finfluencers to Engage with Young Investors" guidebook.