Time to read : 5 Minutes
One in three Australians are turning to social media for financial advice but new research from Compare Club suggests that people who turn to "Finfluencers” are worse at managing their finances.
Our research* found that if you take your financial advice from social media, you’re:
Twice as likely to pay your bills late.
35% more likely to have anxiety about paying your credit card.
Three times more likely to use a credit card.
79% more likely to be living beyond your means (over 75% of your income going towards bills).
We also found that more than 50% of people aged 18-24 are turning to platforms such as YouTube, Facebook and TikTok for their finances.
Head of Research, Kate Browne said: “At a time when the cost of living pressures are high, it’s not surprising that Australians want easy to understand financial insights that are affordable and easy to access.”
“The problem with using social media for financial advice is that it can be difficult for users to figure out how legit the advice is. Our study shows an alarming link between those using social media for financial advice and having difficulty managing their money in real life,” said Kate.
In 2022, ASIC tightened the rules for online creators. What’s considered financial advice extends to include influencers / finfluencers who may be earning money through affiliate links to online brokers. And doing this may be considered as financial service.
“There are a lot of fantastic finance content creators out there who can help with everything from learning to create a budget or how investing works, but where it can get tricky is with the more specific advice. Especially if it’s from overseas and may not translate well in practice in Australia,” said Kate.
“It’s also a good idea to be able to check if the person you follow has the right qualifications too, but that can be easier said than done at the moment,” Kate added.
What does a qualified adviser think about social media platforms for financial advice?
Jess Brady is one person who understands both worlds. She’s been a licensed financial adviser and has built a following of more than 8,000 on Instagram. She runs the Greenhouse Money Growing Program to help people take control of their finances and improve their overall financial wellbeing.
“Economic pressures such as rising living costs and unaffordable housing has resulted in people actively seeking financial education,” said Jess.
“It’s exciting to see more people leaning into improving their financial wellbeing. My advice would be to look for trusted sources to learn from.”
"Just like you probably wouldn’t take legal advice from someone who has never studied or practised the law, when it comes to your money, you ideally want to find someone relatable who is a qualified financial adviser with experience helping people like you” – Jess Brady.
How do you verify if a finfluencer is licensed?
To check if a finfluencer is licensed simply visit the ASIC financial adviser register.
Here you can type in a name, ABN or suburb for a listing. It’s peace of mind that you’re receiving legitimate advice that’s relevant to Australia.
But our research also showed that it’s not just Australian creators that we’re getting financial advice from. Overseas influencers also have a big impact, with 24% of Aussies saying they follow the advice given from people based abroad.
Be aware: applying financial advice from an international finfluencer may do more harm than good. For example in the USA, finfluencers are advising people to declare bankruptcy so they can get out of debt. Applying this advice in Australia would be extremely damaging to your credit rating.
What types of advice should you watch out for?
Here is some common finfluencer advice that’s gone viral, but is risky.
Cash stuffing: also known as the envelope system is not a great idea. It’s never good to keep large amounts of cash in your home. You’re at risk of losing it, having it stolen and it's not earning you any interest.
Drop shipping: a business model that is prominent on social media. It lures social media consumers by suggesting it’s a way to make easy money. It often comes with legal issues, low profit margins, lots of competition, and you have no control of the supply chain.
Investing in AirBnBs on properties you don’t own: don’t be tempted to sub-let a property that you are renting and do not own yourself. It can lead to legal issues and headaches.
Virtual currencies investments: crypto investments fluctuate greatly so they are an extremely risky investment.
Bottom line
Social media can be a useful source of help when it comes to managing and talking about money. The loud budgeting trend on TikTok has encouraged people not to treat their finances as a taboo topic of conversation.
But the challenge is to sort out the good advice from the bad:
Check the qualifications and background of anybody you’re taking advice from.
Check the advice is relevant to Australia.
Don’t blindly follow: plenty of advice may be more general in nature and not really suitable for your own financial situation.
If you’re ever unsure, check with a financial professional first.
Remember, while some finfluencers really do care about giving good advice to people struggling to manage their finances, others may just be doing it for the reach, fame and money. As with anything on social media, it pays to be a little bit sceptical.
Go deeper:
* May 2024 Bill Stress Index:
Our survey results included responses from more than 1,000 Australian households from New South Wales, Victoria, Queensland, South Australia and Western Australia, aged between 18 and 55+.
Financial Disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
