How Financial Advisers Can Beat Out Popular ‘Finfluencers’

Financial advisers should consider how to position themselves to attract younger investors, as social media “finfluencers” are beginning to disrupt the financial advice industry, according to the CFA Institute Research and Policy Center’s report released last week, “The Finfluencer Appeal: Investing in the Age of Social Media.”

According to the report, finfluencers are having an outsized influence on younger generations, in part because they meet young workers where they are: on social media platforms offering free, accessible and digestible content.

To understand what is being offered, the CFA’s researchers dug into finfluencer content in the U.S., U.K., France, Germany and the Netherlands. They then focused their content analysis on three social media platforms: YouTube, Instagram and TikTok, which the FINRA Investor Education Foundation and the CFA Institute identified as the top three social media platforms used by Generation Z investors to learn about financial topics and investing.

The CFA’s researchers honed their findings down to three primary factors influencing Gen Z’s reliance on finfluencers:

• Inadequate exposure to formal financial education;
• Restricted engagement with regulated financial advisers; and
• A preference for acquiring information through digital platforms.

“Finfluencers resonate with Gen Z investors due to their creation of free and readily accessible educational and engaging content,” the researchers wrote. “Moreover, they are perceived as relatable and, in certain instances, deemed trustworthy.”

Adviser Value

To compete with these offerings in a progressively digitized world, advisers should highlight their value proposition, according to the CFA, whose CFA Institute provides the Chartered Financial Analyst designation.

Advisers can stand out by letting clients know about their advantages, according to the CFA, which include:

• The ability to provide customized information and assurances of quality;
• Professional competency; and
• A commitment to duty of care.

Additionally, the report recommended financial advisers adopt a more long-term perspective when assessing the value of their client base.

“Many Gen-Z investors may not currently be viable clients but will most likely accumulate more wealth in the future,” the report stated. “It is unclear whether they will seek out an adviser in the future, especially if they become more accustomed to managing their own finances, which also will likely be aided by future technological developments.”

Unreliable Sources

The CFA’s report also noted the lack of trustworthiness found on social media. Apart from age restrictions, the report asserted that virtually anyone has the capability to generate and post investment-related content on social media, regardless of training or track record.

The simplicity with which finfluencers can create and disseminate content on social platforms, subsequently influencing their audience to make investment decisions, highlights the disparity in regulation governing finfluencers (almost none) and traditional financial advisers (regulations and disclosure mandates).

“Traditional financial advisers make investment recommendations and promote products usually for a fee, but they are mandated to undergo rigorous professional accreditation and continuous professional development to remain compliant with regulatory authorities,” the CFA noted.

Moreover, the CFA report found a lack of substantive authorizations held by the majority of finfluencers who endorsed investment products or provided recommendations: In the content under review, none of the finfluencers formally disclosed their regulatory status. While a few acknowledged not being professional advisers, none specified whether they were a broker/dealer, an agent tied to an insurance company or an authorized representative—designations that would legally permit them to promote products and services without holding the title of a professional adviser.

“It is likely, therefore, that many of the finfluencers who promoted products or made recommendations were not authorized persons or were unaware of their duties to make relevant disclosures,” the report concluded.