- When asked who influenced their decision to save, invest or use a financial product, people are most likely to say ‘an expert I trust’, chosen by 44%.
- 20% would be influenced by a friend recommending something – although only 16% would be swayed by their friends actually having the same product.
- 17% would be influenced by parents recommending it, although only 13% would be convinced by their parents having it.
- Younger people (18-34) are more likely to be influenced by family (27% compared to 17% overall) and friends (29% compared to 20% overall).
Results from a survey of 2,000 people by Opinium for HL in April 2024
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“When you’re not sure about a decision, who do you turn to? When it comes to our finances, it’s overwhelmingly likely we go to an expert, but we also lean on those we’re closest to – including parents and friends.
If we get help from the right place, this is a brilliant shortcut to making great decisions. Someone else may have the knowledge and understanding and have built enough experience for you to benefit from. Getting this kind of support also means you’re less likely to be baffled to a standstill.
However, this approach doesn’t always work. The people we choose may not know what’s right for us, or they may not have as much knowledge as we think. They may be making faulty decisions in their own life, and passing it on as expertise. It means that whoever we turn to, we need to take care when we’re following a financial influencer.
The five questions to ask before following an influencer
- Is your expert actually an expert?
There are plenty of people working for regulated businesses, or as independent professionals, who have built up vast banks of knowledge and experience – like financial journalists.
However, on social media, there are others who aren’t regulated or qualified. They may not have much experience either. There’s no shortage of stock trading tips available online from people who have done it for a couple of months and think they know the answer.
There’s also plenty of content from people who are famous for other reasons, dipping their toe in money matters, but just because you’ve heard of them, it doesn’t make them an expert in this area. There’s a decent chance they’re being paid to lend their name to something, which is something the FCA warned about when Kim Kardashian promoted an untested cryptocurrency on Instagram. She flagged it as an advert, but the regulator was still concerned about sending out a promotion for an unknown product to 250 million followers.
It also pays to bear in mind that being good at making content is very different from being a financial whizz. In fact, regulated businesses have their content tightly controlled, so they are prevented from making the kind of punchy content that unregulated influencers can put out. We’d like the FCA to introduce rules that offer flexibility within the regulatory environment, to allow better creative content. But in the interim, don’t assume an appealing video is the same thing as sound financial knowledge.
High follower numbers can be misleading too. It means someone is good at social media. It doesn’t say anything about their financial expertise. Some experts online have huge, well-deserved followings. However, so do reality stars selling payday loans.
- Are their tips too good to be true?
It can feel like a social media influencer, operating outside the traditional financial services industry, has uncovered a hack that breaks all the rules of finances to give you a head start. They may, for example, say they’ve found a way of making huge returns without taking a big risk. However, it’s far more likely they have misunderstood something or are deliberately misleading you. They may also be talking up the benefits of an asset they already hold in an effort to ramp up the price. The same basic rules apply to us all – higher potential rewards always come with a higher risk of loss.
- If you’re going to follow family or friends, what did they base their decision on?
They might recommend a specific company that has worked for them, and if they have years of experience, it can be incredibly helpful.
However, they need to understand your needs properly. They might, for example, have found the cheapest option and not need any extra support or services – while you might appreciate more help. Alternatively, they might want all the whistles and bells, while you want something simple. They might also have a very different approach to risk. What’s right for them isn’t automatically right for you, so have they considered your specific needs when they made a recommendation?
- What is their level of knowledge really like?
Just because you like and respect someone, it doesn’t make them an expert in everything. Ask them about their specific expertise and experience in this area, and don’t let your judgment be clouded by the fact they’re generally very competent.
- Are you following unthinkingly?
Getting a steer from someone you can trust is a brilliant head-start, but it doesn’t replace understanding what you’re getting into. If they think something is right for you, they should be able to explain why, and how it works. You can then decide how much additional research you want to do, or whether you actually need to pay for financial advice. Your influencer should provide a gentle nudge, rather than strong-arming you into something you don’t understand.”
