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Generation Z investors turn to finfluencers for guidance in investment decisions
Market Outlook

Generation Z investors turn to finfluencers for guidance in investment decisions

The content on networks such as TikTok, YouTube, and Instagram is analyzed to understand the practices of finfluencers.
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8 FEB, 2024

By Johanna Zidani from RankiaPro Europe


The financial influencers, known as finfluencers, dominate the investment decisions of Generation Z, according to a recent study conducted by CFA Institute. "The appeal of finfluencers: Investing in the era of social networks" reveals that the lack of financial education, limited interaction with regulated financial advisors, and the preference for obtaining information through digital platforms drive Generation Z to consume content from finfluencers.

The study assesses the adequacy of existing policies that regulate the activity of finfluencers, highlighting the challenges of regulatory compliance and disclosure in a cross-border social media context.

Similarly, the content on networks such as TikTok, YouTube, and Instagram is analyzed to understand the practices of finfluencers. CFA Institute uses this knowledge to make recommendations aimed at strengthening industry best practices.

The study identifies the main characteristics of the content generated by finfluencers through an analysis of these on networks such as TikTok, YouTube, and Instagram, both in the United States and the United Kingdom, France, Germany, and the Netherlands. According to the study:

  • 45% of the content offered by finfluencers is guidance-oriented (content that provides general information about investments, but does not recommend a specific course of action).
  • 36% of the content included promotions (marketing and advertising of investment products).
  • While 32% made investment recommendations (content that recommends a specific course of action).
  • More than half (53%) of the content offering a promotion included a risk disclosure, compared to 20% in the content that included a recommendation.
  • Finally, 27% of the analyzed content included an affiliate link (links from marketing campaigns associated with investment products).

"Many finfluencers inadvertently provide financial advice that may be subject to regulatory scrutiny or violate applicable laws. Their intention to demystify finance often brushes against regulatory barriers, blurring the line between unregulated informal investment ideas and regulated financial advice.

These not only generate legal risks for the finfluencer, but can also cause potential harm to followers who act according to their guidelines. The consequences can be particularly severe for those who lack a deep financial education and place unwavering trust in the guidance of finfluencers. Therefore, the call for a harmonized regulatory framework that guides cross-border financial conversations on social networks is high and clear".

Ignacio Ramírez Moreno, CFA, successful finfluencer on LinkedIn

"Finfluencers play an increasingly significant role in educating young people about finance, with accessible content that is informative and engaging. However, our research shows that finfluencer content often lacks the necessary risk disclosure, which can hinder consumers' ability to evaluate the objectivity of the information, and some investors may not be aware of when and how finfluencers are paid to promote financial products.

The existing differences in the definitions of “investment recommendations” in the markets entail greater complexity for finfluencers and translate into a gray area for consumers of their content. Some finfluencers may not be aware that their activities are subject to regulation and require adequate disclosure. Therefore, we ask regulators to consider establishing a universal definition of what an investment recommendation means, and for companies and social media platforms to work jointly with finfluencers to ensure compliance with applicable policies".

Rhodri Preece, CFA, Senior Head of Research, CFA Institute

Finfluencers: recommendations

The CFA Institute study offers recommendations to reduce the complexity of regulations, strengthen regulatory compliance and risk disclosure; as well as improve financial education and demand appropriate and transparent practice from digital financial content creators, consumers, and social media moderators.

Among others, the study makes the following recommendations:

  • That the regulators cooperate to design and implement a more universal definition of what “an investment recommendation” means; interact with finfluencers to advise and clarify which influence activities are regulated; and register and publicly report on complaints and activities that have been reported regarding finfluencers.

  • That social media platforms improve their controls and assume additional responsibility to ensure that content creators are transparent and identify what is promotion or advertising.

  • That investment companies that use finfluencers provide them with training on necessary regulatory compliance, if they are not already doing so; review the content of finfluencers, before and after its publication, to ensure that it complies with applicable regulations; keep records of the content they have commissioned and published on social networks; and ensure that finfluencers clearly warn when they are promoting content or are sponsored.

  • That financial education providers improve financial literacy initiatives and strengthen the ability of Generation Z investors to critically evaluate information considering the motivations, qualifications and consistency of the content of finfluencers.

  • That professional investment advisors redouble efforts to engage Generation Z, facilitating their knowledge, professional competence, duty of diligence and prudence and ethical responsibilities to remain competitive in an increasingly digitalized world.

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