Under the finfluence

Winnipeg Free Press

16 hours ago

Opinion
Alyssa Davies knows when a social media post has struck a chord with her tens of thousands of followers: the DMs (direct messages) pour in.
'Every week, people pour their hearts out over what they're going through financially,' says the 34-year-old financial influencer (or finfluencer), who has been writing about money for a decade on her blog Mixed Up Money.
Davies finds she blogs less these days and posts more on multiple social media platforms, including TikTok, though her wheelhouse is Instagram, where she posts short videos about personal experiences with life and money.
Her first-person narrative about money challenges and successes are what draws followers. It's not a unique formula and the insights can be quite banal (like allowing yourself some treat spending occasionally, even when you're trying to stick to a budget).
Yet the intimacy of these financial insights are why hundreds if not thousands of finfluencers are captivating potentially millions of Canadian consumers.
A recent survey of 1,000 Canadians by Tangerine Bank — looking only at TikTok (or 'FinTok,' the hashtag for users seeking financial advice) — point to finfluencers' growing impact, finding nearly nine in 10 using the platform believe it improved their financial literacy.
In following finfluencers, 61 per cent note their posts helped them build at least $500 more wealth.
The report ('#FinTok: the good, bad and straight-up wrong') found while the experience is mostly good, nearly one in four report following bad advice — most often related to investing. Among those individuals, more than 40 per cent lost more than $500.
The report also illustrates how a new generation of consumers and investors are getting financial advice much like they consume other goods and services — for better and for worse, says Lora Paglia, chief operating officer at Tangerine.
'People want everything at their fingertips … from food deliveries to financial advice,' he says. '(Yet) not all advice is created equal and everyone has a unique financial situation.'
Cautions aside, social media platforms — from TikTok to YouTube to Reddit to Instagram — are catching on because young consumers, especially, can learn about an intimidating topic in an approachable way, he adds.
Finfluencers put the 'personal' in personal finance, and regulators like the Ontario Securities Commission are trying to understand their full impact.
It recently published a report called 'Social Media and Retail Investing: the Rise of Finfluencers,' surveying 655 investors. Among its findings are 91 per cent of respondents are active social media users.
Notably, 35 per cent of those respondents state making financial decisions based on finfluencer content.
That more than one-third of Canadian investors could be following advice from largely unregulated financial content providers is concerning, says Meera Paleja, head of research and behavioural insights at the OSC. 'Their level of knowledge can vary greatly.'
Finfluencers range from social media-savvy licensed advisers to those with no professional background in finance at all.
Theresa Ebden, vice-president of the investor office at the OSC, notes the latter group can further be distinguished into two sub-groups: those posting content about money and investing who aren't being paid to promote a product; and those who are paid by a third party to promote a financial product.
The latter group is of most concern to regulators, she adds.
What's more, the OSC has reason to be concerned, given the findings of the second part of its study. It involved experiments with investors to determine finfluencers' impact and found respondents exposed to finfluencers' advice were more than three times as likely to purchase an investment mentioned in posts than those who were not exposed.
'Just seeing an investment talked about on social media dramatically increases the chance people will purchase it,' Paleja says.
In the real world, the OSC is seeing the potential impacts, receiving more complaints about finfluencers — though most involve cryptocurrency, Ebden says.
In contrast, at FAIR Canada (Canadian Foundation for the Advancement of Investor Rights), complaints about finfluencers have yet to arise.
That doesn't mean it isn't a concern, says Jean-Paul Bureaud, executive director of FAIR Canada.
'The research (including the Tangerine study) generally shows that investors following finfluencers may be losing small amounts … so maybe they don't feel it's worth reporting.'
Yet he can see how it can be potentially problematic, given finfluencers' unique and growing appeal. 'People like feeling part of a community, having peer-to-peer interactions and learning from others who have been through the same challenges.'
Like any other financial literacy resource, finfluencer content can be 'a double-edged sword,' with the dangerous edge being those paid to promote products that may not be in consumers' best interest, Bureaud adds.
The OSC study, however, did find potential solutions to better protect consumers. 'The greatest impact in the experiment was inoculation,' says Paleja.
Like vaccines introducing a harmless piece of a virus to an immune system to recognize and fight off the real virus in the future, inoculation for investors involves introducing 'a weakened form of the misinformation they might encounter' on social media, she explains.
Davies, who is completing her master's degree in financial psychology, offers some inoculation of her own, noting content consumers should be skeptical of any advice encountered online and they need to further confirm its veracity elsewhere before applying it to their own lives.
Wednesdays
A weekly dispatch from the head of the Free Press newsroom.
Indeed, most followers she engages with don't blindly follow finfluencers.
Rather, they see them as an entry point to learning more about subject matter they find intimidating, giving them confidence to learn more so they can make better money decisions.
'It's not about giving people perfect advice,' Davies says. 'It's really about helping them feel less alone on their financial journey.'
Joel Schlesinger is a Winnipeg-based freelance journalist
[e-mail]