Social media a key information source for younger consumers

As the Financial Conduct Authority (FCA) cracks down on online financial promotions, questions have been asked over whether industry should challenge or collaborate with this new wave of influencers.

The rise of financial influencers, or ‘finfluencers’ has reshaped how consumers—particularly younger generations—engage with financial information. Social media has become a major source of financial guidance, with influencers providing insights on budgeting, investing, and wealth-building strategies. However, this growing influence has triggered concern from regulators and financial professionals alike.

Social media has become a key information source for younger consumers seeking financial guidance. According to research from Royal London, one in four individuals aged 18–34 have relied on social media for financial information in the last two years—second only to seeking advice from friends and family. Royal London pensions and tax expert Clare Moffat explains: “Many money bloggers and finfluencers use social media channels as a way of sharing information about their personal experience of managing money, and this can resonate with people in a powerful way.”

Finfluencers often simplify complex financial topics, making them more accessible to audiences who may otherwise find traditional financial advice intimidating or unaffordable. However, this growing influence also comes with risks, particularly when influencers promote unreliable, misleading, or unregulated financial products.

Regulatory crackdown on social media promotions

As finfluencers continue to gain traction, the FCA has intensified its scrutiny of financial promotions online to protect consumers from harm. In July 2023, the FCA announced plans to revamp its social media guidance, updating rules to reflect modern digital marketing trends. FCA director of consumer investments Lucy Castledine stated: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.”

By March 2024, the FCA issued specific guidance targeting financial promotions across platforms like TikTok, Instagram, and YouTube. The regulator emphasised that all social media adverts must be fair, clear, and not misleading, ensuring that consumers receive balanced information with appropriate risk warnings. Castledine reinforced this stance: “Promotions aren’t just about the likes—they’re about the law. We will take action against those touting financial products illegally.”

These regulatory efforts have been coupled with enforcement actions. In October 2024, the FCA interviewed 20 finfluencers under caution for potentially breaching financial promotion rules. The watchdog also issued 38 alerts regarding illegal financial promotions and took action against more than 10,000 misleading adverts in 2023, a sharp increase from 8,500 in 2022.

FCA joint executive director of enforcement and market oversight Steve Smart highlighted concerns about get-rich-quick schemes promoted by social media personalities: “Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt.”

The FCA’s efforts have also led to policy changes among Big Tech companies, with several platforms now requiring that financial promotions be approved by FCA-authorised firms before being posted.

Challenges for traditional financial advisers

The rise of finfluencers presents a significant challenge for traditional financial advisers, who must compete with social media personalities offering quick, engaging, and often free financial insights.

The emergence of finfluencers comes as the number of traditional advice businesses has been falling. The number of UK financial advisers has grown slightly in recent years, with 28,227 advisers working in financial advice firms in 2022, up from 27,839 in 2021. However, the industry is also consolidating. A NextWealth report found that firms offering retail investment advice declined by 8.1% in 2023, as many merged or left the market.

Lewis Silkin partner & co-head of financial services Wendy Saunders acknowledged the difficulties advisers face in competing with social media influencers.

“It is a challenge for financial advisers to compete with finfluencers on social media,” Saunders said. “Ultimately, they need to emphasize their authority on the subject matter in an engaging and exciting way, highlighting their regulated status and high levels of customer service.”

If properly regulated, finfluencers could act as an entry point for financial education, raising awareness about key financial topics before consumers seek professional advice. Moffat said she believes that social media can play a positive role in financial literacy when used appropriately. “Having financial information available on social media can be a good thing, simplifying and engaging people in a subject many feel is complex. This can particularly benefit younger people who may not have access to financial advice,” she says.

The FCA’s tightening of social media regulations, combined with increased enforcement actions, arguably signals a new era of accountability for financial promotions online. However, this also raises the question of whether traditional financial services should adapt to the digital landscape by integrating more engaging, social-media-friendly content into their strategies.

Ultimately, finfluencers and financial advisers do not have to be adversaries. If used responsibly and regulated effectively, social media can complement traditional financial advice, helping bridge the gap between financial education and professional financial planning.

Source: FA