Young investors are turning to financial influencers, or “finfluencers,” on social media platforms, such as YouTube, TikTok, and Instagram, for information and advice about investments. Some financial firms are hiring finfluencers to engage with young investors (those aged 18–25). Finfluencer content can be informative, engaging, and relatable and can help improve financial education and inclusion. However, with low barriers to entry come increased exposure to potential bad actors and questionable advice.

The research set out to answer three questions:

• How well do existing policy frameworks account for finfluencer activities?
• What are the key characteristics of finfluencer content?
• Why and how are Gen-Z investors engaging with finfluencer content?

“The Finfluencer Appeal: Investing in the Age of Social Media” examines the finfluencer model and how young investors use such content to make investment decisions. It illuminates both the challenges finfluencers pose to the traditional advice industry and the opportunities they unlock for attracting and retaining assets from this emerging investor base.

Richard Coffin — The Plain Bagel

Professional advisers can benefit from the research findings to better position themselves as highly qualified sources of advice to an online generation. Compliance officers at financial services firms that use finfluencers can play a key role in identifying and mitigating risks. Fostering a culture of compliance and responsible engagement is paramount to protect investors. Young investors need to be supported with financial literacy to enable them to critically evaluate information and the motivations and qualifications of finfluencers.

Investment companies that use finfluencers should provide them with compliance training if not already doing so and ensure that finfluencers clearly disclose when they are promoting content or are sponsored. And social media platforms should work to ensure finfluencers understand what is required of them and make relevant disclosures in their content.

For their part, regulators can reduce policy complexity and harmonize rules across markets, which is critically important considering the transboundary nature of social media content. The report recommends that regulators cooperate to design and implement a more universal definition of an investment recommendation. It also encourages regulators to engage with finfluencers, as well as record and publicly report data on complaints and whistle-blowing activities.

Two elements of this report make it a valuable resource for investors, marketers, and policymakers: primary research of social media content — encompassing a review of 110 unique pieces of finfluencer content on YouTube, TikTok, and Instagram — and focus group interviews with young investors. The five geographic markets studied are the United States, the United Kingdom, France, Germany, and the Netherlands.

The report includes recommendations for investment firms, regulators, and social media platforms. It is the latest in the New Generation of Young Investors, New Ways of Investing research series from CFA Institute Research and Policy Center.