Back in May 2021, Siân looked at why your clients should think twice before taking investment tips from social media amid a rise in influencer-based promotions.

Since then, the FCA has confirmed a 172% rise in the number of ads they amended or withdrew during the year.

An FCA spokesperson, quoted in FTAdviser, has confirmed that “Retail investments’ use of social media influencers on various platforms to market investments are becoming a concern […] Firms should ensure they have taken appropriate legal advice to understand their responsibilities before using influencers.”

Keep reading for your look at the rise of online spaces to promote financial services and the dangers they pose to your clients. 

Google has already offered the FCA funds to tackle online ads

Whether your clients are looking to invest, save toward a pension, or are seeking financial protection, they could be exposed to worryingly inaccurate and potentially dangerous ads across social media platforms.

The FCA intervened in various financial services sectors, amending, or withdrawing ads in:

• Retail investments and retail lending (77% of total interventions)
• Retail banking (11%)
• Pensions and retirement income (6%)
• General insurance and protection (4%)
• Asset management (1%).

FTAdviser recently reported that Google has offered the FCA $3 million (£2.19 million) in ad credits to help push its consumer-protection message, with further funding pledges to help scam awareness campaigns like those run by UK Finance and the Advertising Standards Authority.

The FCA can have ads removed but clients still need to remain vigilant

One investment platform was told to remove all of its paid-for social media influencer posts. The influencer involved had gained media interest following a story about cleared debt.

Suggesting that investment was a way out of problems with debt – without the appropriate risk warnings – was deemed to be misleading. Especially damaging, according to the FCA, was the potential for the influencer’s followers to be similarly in debt, and so see investment as a means of escape.

Adverts and posts had to be removed from all social media accounts held by the investment firm, including Instagram, TikTok, Facebook, and YouTube.

Other influencer accounts have been found to promote get-rich-quick schemes, showcasing manufactured lifestyles, allegedly attainable through signing up to specific investment “opportunities”.

Using the characteristic scammer tactics of time-sensitive offers, your clients might be targeted on social media and asked to part with their money to achieve unrealistic, “guaranteed” returns, but only if they invest straightaway.

These investments are unlikely to contain the necessary risk warnings, could be overseas and so not subject to FCA regulation, or be in high-risk areas such as cryptocurrency.

Every investor should know the red flags to look out for

There are some simple scam red flags to be aware of, whatever fork of investment you are considering:

• Cold-calls about pensions – these were banned in 2019 so receiving one is highly likely to indicate a scam
• Time-sensitive offers or once-in-a-lifetime opportunities – these are designed to panic consumers into making poor decisions without taking the time to get the appropriate advice
• Unusual or overseas investments advertised on social media or offered during a cold-call and promise “guaranteed returns” – these are often high-risk, unregulated, or non-existent and are highly unlikely to contain the necessary risk warnings.

Any consumer contacted out of the blue can use the FCA Register to check the company they are dealing with is fully regulated and visit the FCA’s ScamSmart page for further information and useful tips.

Get in touch

The rise in the use of social media influencers to target investors is worrying for your clients and for the younger generation, for whom social media can seem an increasingly legitimate source of investment “advice”.

With scam numbers on the rise, and genuine and fake celebrity endorsements being used on investment ads, understanding the risks is vital.

Professional financial advice, from authorised individuals within regulated firms, is the best way for your clients to keep their money safe. If you have clients who would benefit from long-term financial planning, please get in touch. Email enquiries@boolers.co.uk or call 0116 240 7070.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.