The new money whisperers: Only six percent of finfluencers know what they are doing

Anyone who wants to find out about finances will sooner or later end up on social media. There are countless financial influencers there. Studies warn against their sometimes incorrect investment tips. In order to expose the black sheep, experts are calling for regulation.

A man lets his gaze wander over the roofs of a city and, accompanied by a dramatic musical backdrop, tells how he worked his way up from a humble family background. Today he is “financially free” and has “millions” in his account. Ibo Ahmiane aka “Professor Finance” is one of the most influential financial influencers in Germany, or Finfluencer for short. In videos on YouTube, Tiktok and Instagram he gives stock tips, explains Bitcoin or how to invest money to get a million euros.

He is one of almost 360 finfluencers in Germany, on Instagram alone. The HHL Leipzig Graduate School of Management together with the St. Pölten University of Applied Sciences and the consulting firm Paradots have a total of over ten million followers current study determined.

Just as influencers often talk about fashion or beauty topics, finfluencers have found their niche in finance. Thematically they are broadly based, says Eloy Barrantes, CEO of Paradots, in the ntv podcast “Learned something again”. “There are finfluencers who only deal with Bitcoin or only with crypto, others are only concerned with tax tips or only with real estate investments.” Unlike traditional players in financial communication, Finfluencers spread financial content authentically, personally, but also entertainingly – as infotainment.

“Many people gambled during Corona”

According to the study, around a third of Finfluencers are nano or micro influencers, meaning they have fewer than 10,000 followers. The ten largest finfluencers in Germany each reach over 200,000 followers. They often have an academic, economics background and are usually male.

Thematically, the Finfluencer postings are often about individual stocks, but they also explain basic things – what bonds are, how to best save, or what the best credit cards are. In this way, Finfluencers motivate young people to engage with the topic, praises Barrantes. “They seem to be able to communicate these topics in a way that resonates with the younger generation. That’s a positive thing because you have to think about your retirement planning.” Securing old age and building long-term wealth are the main motive of young investors, rather than “gambling on the stock market and getting rich quick,” according to the expert.

Many of the finfluencers have been active since 2020. During the pandemic, new channels have literally sprung up. “During the Corona period, many people gambled and were keen to try new things,” says Henning Zülch, Professor of Accounting, Auditing and Controlling at HHL Leipzig in the “Learned something again” podcast. This was ideal for many finfluencers. Meanwhile, those who want to invest have become more knowledgeable, “including Gen Z.” According to the, the number of young stock savers has increased German stock institute doubled in the past ten years.

BaFin warns against finfluencers

The problem is: Anyone can become a financial influencer. Theoretically also those who have no idea at all about money, stocks and credit transactions. They are not certified and are not under the supervision of the Federal Financial Supervisory Authority (BaFin). BaFin warns Therefore, avoid taking advice from social media without checking it. A danger especially for young people, warns Barrantes, “who have had no contact with the topic of finance and then come across a large mass of dubious finfluencers on social media who want to sell their own products and actually want to make money with bad tips.”

Less than six percent of finfluencers really have any idea what they are saying international study released in May 2023. To do this, the scientists evaluated forecasts from finfluencers on the Stocktwits platform, a social media platform for investors. Just over half of Finfluencers perform worse than the market. According to the study, finfluencers with less knowledge have more followers than those who make correct predictions.

“Even good finfluencers make wrong investment decisions,” Barrantes makes clear in the podcast. That is human. “Nobody can predict how the market will develop.” This could also happen to reputable magazines or analysts; their assessments or purchase recommendations are not always correct.

Losses on investments

Also one study by US scientists from April last year casts a rather negative light on Finfluencers. They specifically looked at crypto finfluencers. Your recommendations are therefore hardly suitable for long-term investments. The influencers’ predictions on

What influence do influencers really have on financial decisions? As a source of information, they are at least relevant: around half of the followers have already invested based on their tips and are on another one study from the St. Pölten University of Applied Sciences. Most people also obtain information from classic online financial media. The most important sources of information here are financial portals and online business reports – even before social media.

How do I recognize bad finfluencers?

Distinguishing good financial influencers from bad ones is possible. The first warning sign is when they post anonymously, Barrantes explains in the podcast: “If they promise quick money, if it’s about surefire investment ideas or if their own products like copy trading are promised. If there are very clear recommendations, then that’s it also a clear warning signal.” Even if finfluencers advertise courses or academies with a regular fee, you should pay attention. You should also pay attention to the information in the disclaimer about the risks of securities investments.

The Finfluencer market is not yet regulated. You don’t have to qualify and you don’t need any certificates. Nevertheless, they must adhere to the rules of the capital market.

Both experts also see social media such as Instagram as having a duty to control more and take action against black sheep. And BaFin also needs to create a framework, says economics professor Zülch in “Something Learned Again”. “We need something like a driving license. You have to create access requirements where we can ultimately say: They know what they’re talking about. The French are doing it in the market, Australia and India are coming now, there are already other markets that do it “We recognized the influencers’ situation and didn’t just let it go unregulated.”

Henning Zülch and his colleagues now want to develop a quality assessment for influencers in a new study, a “Finfluencer Quality Score” and also test it on real examples. The aim is for the Finfluencer scene and its advice to become more transparent and trustworthy.

“Learned something again” podcast

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