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Social media financial advice – Dangers to highlight to your clients

A recent phenomenon on the popular social media platform, TikTok, called ‘Fintok’ is causing concern that viewers could be vulnerable to financial misinformation.

Many of these videos come across as “get-rich-quick” schemes – showing off cars, big houses or private islands. They also share financial advice nuggets, or promote buying certain stocks with catchy titles like “retire a millionaire” and “one stock that could make you rich”.

Financial experts are warning that taking advice from such online platforms may have real and devastating consequences on young* investors.  “Users should be wary of videos that are portraying lifestyles that seem too good to be true. Taking financial advice from online social platforms may have real and often devastating consequences on one’s finances, especially if you are starting on your financial journey, or learning to invest,” says Nomi Bodlani, head of strategic markets at Allan Gray, adding that financial advice should be tailored to your specific needs and circumstances; it is not a one-size-fits-all exercise.

In many cases the people behind these videos are youngsters without any financial qualification, and some have a history of peddling promises of making money quickly and easily.  According to Bodlani this has opened the door for scammers and fraudsters to manipulate the emotions of users in order to get money.

The videos, in many cases, over-simplify complex processes and make it seem possible to earn huge profits and financial returns, in return for helping the user who is posting the financial video, to build their community.

“We must remember that there is no such thing as a free lunch. The quick ways to make money often end in losses. A more prudent way to financial freedom is to spend less than what you have, and to save diligently.”

“Many investors, whether starting their journey or heading into retirement, fall prey to scammers because they do not have a solid financial plan.” Bodlani emphasises the role of a good, independent financial adviser that will explore their clients’ unique set of circumstances and implement a long-term investment strategy to help them reach their financial goals.

Click here to download Bodlani’s insights that include tips to share with your clients – tips to ensure a scam-proof investment approach as well as what to look out for when considering a new investment.

*Past experience has shown that elderly investors and retirees are often the target market for scamsters who prey on their gullibility and insecurity.

The FSCA regularly publishes warnings against individuals and companies that offer unauthorised financial services business and breach various financial sector laws. Click here to read the latest warning against what the FSCA regards as a potentially precarious investment scheme.

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