Wall Street is a maze that is often too easy to get lost in. Even just learning the acronyms alone can be a monumental feat. The dictionary on financial content site Investopedia boasts more than 13,000 definitions for different financial words or phrases.
To jump the educational hurdle, many Americans rely on financial planners to advise their investing. But they cost money, and hiring a financial planner can be a costly measure for potential investors.
Instead, many Americans are turning to a free source of information: social media. Every day investors are putting their trust in financial influencers to choose where to put their money.
Isabella Kwai, a reporter for the New York Times, recently wrote about these “fin-fluencers” and the advice they give. “Marketplace” host Kai Ryssdal spoke with Kwai about who they are and why their viewers should think critically before listening.
Kai Ryssdal: Just generally speaking, who are these financial influencers out there?
Isabella Kwai: So financial influencers can be really anyone who is online and sharing information about investing or personal finance, or it could be something from a celebrity who has a big profile and is partnering or working with, you know, financial services or products. And I think that is something that is really interesting about financial influences, or “fin-fluencers.”
Ryssdal: I’m sorry. “fin-fluencers”? Is that we are calling them?
Kwai: Yeah, it’s very sleek. People have really combined these words, but financial influencers, or “fin-fluencers,” they really can be anybody. And I think that is part of the concerns around them.
Ryssdal: Let’s talk more about that, because we’ll get to the possible upsides. But, “on the internet, they don’t know you’re a dog”, right? That’s the famous Far Side cartoon. So, it could be anybody is the point, right?
Kwai: Right. And one of the issues that makes this field quite difficult is it’s so vast. There are people who are giving you information who may not be qualified or certified financial planners, and there is potential there for misinformation to spread. In the most serious examples, you have influencers who have been accused of hyping pump and dump schemes or promoting high risk assets, and it can be really hard for your everyday person or your everyday investor to look at all these different influencers online and work out what is going to be handy information for them and what is potentially dangerous information.
Ryssdal: So let’s get the caveat in here that if you’re going to follow a “fin-fluencer,” I can’t believe I just said that, you have to do some due diligence and find out who they are. But part of the reason they’re so popular is because they’re accessible, right? They probably cater to underserved groups, people who might have been shut out of this sort of wealth industry as it were, right? I mean, there’s lots of things that are appealing.
Kwai: Absolutely, and what some financial influencers are good at is putting it in everyday terms that people can understand. And there are influencers out there who I spoke to as part of the story, who are certified financial planners themselves or certified financial advisors, and they do share information that helps people become more literate when it comes to their finances. But you know whether they are qualified to do that, experts have recommended you really should be thinking about this.
Ryssdal: Yeah, absolutely. Given that social media is, generally speaking, a vast unregulated wasteland. I imagine there aren’t too many regulations protecting people from acting on this bad advice, right? If you act on questionable advice from an influencer, you’re kind of on your own right?
Kwai: Well, not entirely. One thing that is interesting to explore is what’s the responsibility here? And in the U.S., the SEC, for example, has pursued some high profile celebrities for not being honest about whether they were paid to promote an asset or not. But ultimately, one big challenge in this is jurisdiction. People can be following advice from someone in the U.S. while they’re, sitting, like myself, in London. And the question being, would this fall under U.K. jurisdiction? And that makes it difficult for regulators to pursue some people who are perhaps spreading misinformation.
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