Social media investment advice leaves one in five at risk of scams

Telegraph

2 days ago

Over a fifth of investors are at 'significant risk' of being scammed because they get their financial advice from social media, analysis shows.
Some 22pc of current and prospective investors learnt about investing from social media compared to just 19pc who used an independent financial adviser, according to a report by financial services firm Robinhood and risk consultancy Global Counsel.
Nearly half (48pc) of those polled said they used financial advice websites to inform their investment decisions, 37pc relied on speaking to family and friends, while 32pc read newspapers and magazines.
The report warned that while social media had 'the potential to engage under-represented groups', it also came with 'significant risks' of exposing potential investors to scams, unscrupulous advice and fraud.
Financial regulators have become increasingly concerned about the rise of 'finfluencers' who use their social media accounts to promote financial products or give unregulated financial advice.
More than £1.1bn was stolen through fraud in Britain in 2024, according to financial services body UK Finance. Investment scam cases fell by 24pc last year, but losses rose by 34pc – the first rise since 2021.
The Robinhood research also found that ethnic minority investors were more likely to use social media to learn about investing (40pc) than non-ethnic minority investors (16pc). Some 23pc of female investors used social media to inform their decisions, versus 20pc of male investors.
The latest findings are in line with a recent survey by the Financial Conduct Authority (FCA), the City watchdog, which found that one in six investors used social media to either research investment, find new opportunities or get updates on existing investments – rising to half of all investors aged 18 to 24.
The FCA has launched a fresh crackdown on finfluencers, having previously issued guidance for influencers advertising financial products using memes, short videos, and gaming streams. It warned influencers that promoting a financial product without regulatory approval could be a criminal offence.
Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, said: 'Crypto and other investment fraud is on the march, as fraudsters see the opportunity to fleece their victims of thousands of pounds. The criminals are using increasingly sophisticated approaches, including the emergence of deep fakes.
'Investment scams come in a number of guises, but they essentially involve the victim being convinced to hand their money over, in the belief it will be invested in a clever scheme to make them rich without risk.
'Criminals can use any asset to draw people in – including gold, property, cryptocurrency, carbon credits, land banks, wine, or lesser-known shares. In reality, these investments are not what they seem. Some are worthless, some are enormously risky, and some never existed at all.'
'Take social media content with a pinch of salt'
Laura Suter, director of personal finance at investment firm AJ Bell, said: 'One risk by using social media to research products is that you end up following advice or buying investments that aren't suitable for you. But the even bigger risk is that you end up getting scammed by fraudsters.
'We know that a lot of investment fraud originates on social media because it's easy to spread the message quickly to thousands of users. These fraudsters will make claims of sky-high returns, impersonate well-known people and funnel victims into dodgy products, all with a sense of urgency.
'With technology improving and fraudsters getting smarter, lots of these scams are very realistic and believable. It's why everyone needs to take social media content with a pinch of salt.'