Be wary of financial advice on social media

There's no shortage of financial advice on social media. But how much of it can you really trust? How many "finfluencers" really have your best interests at heart?

In some cases, people can even be unwittingly exposed to illegal schemes such as "money flipping", which can lead to severe consequences. In this video, PAUL LEWIS, the financial journalist and host of BBC Radio 4's Money Box, shares his insights about how we can separate the good advice from the bad.





Transcript

Robin Powell: If you look on social media, there’s no shortage of people offering you financial advice or seemingly easy ways to make money. A classic example is so-called “money flipping”, which is usually a scam and is in any case illegal. Financial journalist and broadcaster Paul Lewis says you should never rise to the bait.

Paul Lewis: That is illegal activity. You are money laundering and, if you are caught doing that, then you may be prosecuted but you will certainly find it very hard to open a bank account in future for many, many years. And that will mean you can’t get a student loan, for example, and it will be harder to get a job. So, it’s very damaging: don’t trust “get rich quick” schemes on social media. Don’t even trust the advice on social media because a lot of it is by unregulated people who don’t know what they’re talking about and are out to take money off you, not to help you with your money.

RP: Paul Lewis says there is perhaps one exception to his general advice to ignore online money tips. But, he warns, you still need to exercise caution.

PL: There are now mortgage brokers and regulated financial advisers who do have a presence on social media. I have a presence on Twitter, and I hope people can trust what I say on there! But make sure that the people you are taking advice from – you have checked them out, that they’re regulated and they know what they’re talking about. They’re not people who have got some brilliant scheme to make money quickly, not people who think they know where to invest; and just be very, very cautious about it. The safest rule is: never trust anyone but, if you want to trust anyone, check who they are, what they’ve done, if they’re regulated – and then look at their advice and accept it cautiously. But don’t always believe everything you read because a lot of it is rubbish.

RP: The problem is that working out what’s good advice and bad advice on social media is extremely difficult. And remember, the vast majority of people you come across on social networks you’ve never net in real life.

PL: Sometimes it’s a matter of common sense. You do see people doing things and most other people would look at it and say, “Oh, why on earth did they do that?” But you get caught up in the moment, and there are people who are very good at playing psychological games with you and leading you into things so that you do things so that, in retrospect, you think, “Oh, that was a bit silly.” If something seems too good to be true, it is. That’s one of the oldest cautions in the financial services industry – and it is correct! So, you’ve just got to check peoples’ backgrounds. I always think of social media: it’s like, you’re walking down the street, somebody comes up to you, and says “Oh I’ve got a great idea: give me a tenner and I’ll turn it into twenty.” Would you really do that? Of course you wouldn’t! Social media is a street full of strangers – and they might be smiling, they might sound very pleasant, they might have nice photographs (it may not even be a photograph of them, of course!) but do not trust them, because they are often out to get you.

RP: In summary, then, you need to be very careful. If you’re tempted to act on something you read about on social media, give yourself time out to think about it. And, if you’re in any doubt, always consult a financial adviser.