Where do you go when you want advice? Your answer is likely to depend on what you want advice about. Do you go to your friends, family, work colleagues or just go straight online?
I’m old enough to have spent my childhood and teenage years in the days before the internet. Back then, information sources were pretty much limited to newspapers, radio, linear TV, books and the formal education system.
You had to work hard to learn something new outside of what the mainstream media was choosing for you.
These days there are online courses on pretty much everything you could possibly want to learn.
And much of this information is free. There are so many positives to be living in a world where you can learn anything you want for free.
But how do you know who you can trust?
Trust
The UK Financial Conduct Authority, as well as the US regulator is becoming increasingly concerned about online financial influencers.
They are particularly concerned with the impact they are having on the younger generation.
The FCA are focusing on the inappropriate promotion of particular financial products by social media influencers.
The FCA said that “Too many people across the UK are being shown financial promotions from unsuitable sources”. and “We’ll be ramping up our work to stamp out illegal financial promotions particularly those found on social media”
It appears that as a result, we could be reaching an important fork in the road for online financial influencers based on this latest article in the financial times
The FCA are now saying that while part of their role is to ensure they crack down on illegal financial promotions that are misleading consumers, they also see that social media influencers have an important role in how the FCA can engage with younger audiences.
I have spent the personal time and investment to pass IFA exams so I am delighted with this latest view from the FCA and so should you.
Why? Because if the FCA deliver on their promise, it means that you can feel more confident that online financial influencers can be trusted. They will be clamping down on illegal financial adverts and promotions but supporting trusting sources of guidance.
Now that’s a big if because there may be more dodgy finfluencers on TikTok, YouTube and other social media than the FCA has the time and resources to keep up with. But it’s all moving in the right direction whereby regulators are often in the situation where they are playing catch up with what’s happening in the real world in many domains.
In the meantime, what you can do to ensure you don’t get misled? Because ultimately if you are persuaded to do something with your money that’s not going to deliver on the promise then that’s no different than being scammed.
How do you make sure you are only taking advice from trusted influencers?
1.Understand the difference between advice and guidance
This is the first principle to understand.
I’ve taken this quote from the UK government pensions and advice service so that you know it’s a trusted definition of the difference
“Guidance is an impartial service which will help you to identify your options and narrow down your choices but will not tell you what to do or which product to buy; the decision is yours. Advice will recommend a specific product or course of action for you to take given your circumstances and financial goals.”
This is the principle I have always followed in my content both here and on my YouTube channel. It’s a very simple principle to follow, because I don’t know you and your specific circumstances, then what I am saying here can’t possibly be advice on what you should do that’s right for you and your circumstances.. I’m often asked for specific advice in the comments on my videos, which I don’t mind at all but I will always answer the question with general guidance.
Another way to explain guidance is that it’s an explanation of some aspect of personal finance to allow you to feel better informed to make the decision yourself.
This is also what I do as a financial coach on a one to one basis – even though I am qualified to give specific financial advice as well. But that’s only appropriate in a 1-1 setting after going through a thorough fact finding exercise with the client.
So if someone online is telling you to buy a particular product with no explanation of the risks involved or encouraging you to seek your own independent financial advice before committing then be very very cautious.
2.Do some basic research on the influencer
Any trustworthy online financial influencer will have a publicly available profile. For example James Shackell has a very popular YouTube channel and you can see from his linked in profile that he’s a partner at Nova wealth so you can know for sure that his information is trustworthy and realible.
So LinkedIn is a good place to find out more about the qualifications and experience
3.Do additional research and seek independent advice
At the very least you should do your own additional research to verify what you are being told by an influencer. Don’t act upon the views shared by one person. Find another trusted influencer in the same space.
When it comes to making significant financial decisions then consider paying for your own independent financial advice. For example if you are coming close to retirement and you are not sure whether to buy an annuity or leave your money invested in a drawdown – or a combination of both. I would consider this to be a significant financial decision that is well worth paying for proper advice.
Why not leave me a comment on this article to give your views of online financial influencers and how you have figured out who to trust.
Do you agree with my checklist or would you add additional ways to ensure the guidance is valid?
Thanks for reading!