- The Financial Conduct Authority (FCA) this week carried out of a ‘week of action’ against illegal finfluencers (source: FCA spearheads global action to stop illegal finfluencers | FCA)
- This included securing a guilty plea from Geordie Shore’s Aaron Chalmers for illegal promotions on social media and starting proceedings against two more people for similar offences
- It also requested 120 accounts to be taken down from social media platforms – which had posted 1,267 illegal adverts between them
- The regulator says social media giants need to do more to stop illegal financial promotions
- Seven ways to protect yourself
Sarah Coles, head of personal finance at AJ Bell, comments:
“Georgie Shore’s Aaron Chalmers pleaded guilty to illegal financial promotions on social media, but he’s just one of a huge number of finfluencers who could put your finances at risk. The FCA says social media giants need to do more to protect their users.
“There are some fantastic finfluencers, with incredible knowledge and the right intentions, who work within the rules to reach groups of people who might otherwise never learn about their finances. However, there are also some who are breaking the law – often faking luxury lifestyles to convince people they have the answers. Meanwhile, there are others who are actively trying to help people, but are issuing horribly misleading advice.
“It’s easy for people to get led astray when social media serves them gripping content that sounds convincing and promises to solve their problems or transform their life. The latest FCA Financial Lives survey asked people who had been the victim of a scam where they had first come across it and more than one in five named social media. Anyone can set themselves up as a financial influencer, so you need to know who you’re listening to and take steps to protect yourself.”
Seven ways to protect yourself
- Be sceptical from the start. Don’t automatically believe what you see on social media. Do your research on both your finfluencer and their advice. Make sure you get information from different sources.
- Use the FCA firm checker tool to confirm that any firm is authorised. This will also alert you if the firm you’re asking about is on a warning list. You can use the tool here.
- If it sounds too good to be true, walk away. Anyone saying they can guarantee high returns without risk is claiming the impossible – there’s always a trade-off between the two.
- If you don’t understand an investment, don’t touch it. It’s never a good idea to get into anything you don’t understand. It may be that you’re being deliberately bamboozled, or it could just be that the product is far too complicated for most people to understand – like ‘contracts for difference’ or foreign-exchange trading schemes. If you go into it without being fully informed you could lose far more money than you thought possible.
- Make sure you understand the bigger picture. Someone may show you a screenshot of their trading history and their gains, but it’s very easy to curate what to show people on social media. Make sure you understand what you’re seeing and what it really means.
- Don’t take lots of followers as a sign of expertise – or lots of views as an indication that something is legitimate. All it shows is that someone is good at creating content and winning attention. They might have got this attention by telling people lies they want to hear.
- Be wary of anything where they have approached you. Often scammers will slide into your DMs on social media with an offer that you can’t refuse. No legitimate investment company would contact you out of the blue on social media with an investment. Delete the message and block the contact. The same is true of texts, emails and phone calls out of the blue.