The perils of receiving financial advice on social media


Social media platforms give us access to huge amounts of information. However, can we be totally sure that it is credible? Scammers and fraudsters pretty much have free reign to take advantage of unsuspecting users by giving false financial advice, which, if followed, can be damaging to your monetary wellbeing, especially if you’re thinking about beginning your financial investment journey.

It’s vital to be careful of any online financial investment posts that ‘promise’ high returns in a relatively short amount of time. It would be better if you acquired financial planning advice from qualified independent financial advisers.

In recent times, lots of videos have appeared on Tiktok with hashtags including “Fintok,” “financetok” “Moneytok,” or “howtoinvest” which offer pieces of advice that contain all the buzzwords to try and entice you, such as “this stock will make you incredibly rich” and “retire as a millionaire”.

In the majority of cases, the groups or individuals who make these videos are total scammers with no financial qualifications, often over-simplifying complex financial processes, manipulating you to invest your cash into fake funds. The pandemic as a whole has caused one of the most challenging economic periods in recent history and taught us the importance of making well thought out and  informed decisions about our investments and savings.

Time really is a luxury that can be the most significant advantage for any young investor. By investing as early as possible, once you have started earning a stable income, you can really reap the rewards of compounding interest on your investment to aid you in building real wealth.

Here are some of our top expert scam-proof tips and red flags to look out for as young investors.


4 tips in preventing fraudulent investment advice

  • If a potential investment insists that you to need to recruit other investors to receive a return on your investment, this is what’s called a pyramid scheme.
  • Scammers really don’t want you to spend time researching and learning about the investment opportunity, and therefore you tend to find that there’s a time limit in which you can invest. Also, steer clear of phrases such as a “once-in-a-lifetime opportunity”.
  • Be cautious if any investment doesn’t specify how it actually earns returns. Do you know the underlying assets on what you’re investing in? For example, if the fund has a big percentage of assets in equity, you can expect market fluctuations, and it is realistically only likely to provide you with returns over a long period, which could be too risky for you. Investment funds such as unit trusts have mandates and factsheets that should be easily available. They fully explain the ins and outs of how the fund works.
  • If the investment isn’t registered to a financial body like the Financial Sector Conduct Authority, it means it’s unregulated – this is a massive red flag. You should also make sure you contact the relevant financial bodies to verify the registration of any financial entity that is considered reasonably new.

Keep this ethos in the forefront of your mind at all times when it comes to investing: If it seems too good to be true, then it usually is! Always trust your gut instinct – it will help you to avoid long-lasting capital loss. Always consider expert advice. Speak to a fully qualified independent financial adviser who can talk you though with knowledge about whether investing in a particular fund is considered to be financially safe.


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