Social media's next victim could be your 401(k).
Finance influencers — or "finfluencers" — are becoming a hot new thing on social media sites like TikTok and Instagram. This may be the next big content moderation headache for the industry.
People who can translate the strange, technical language of finance and investing into something that is accessible and entertaining are bound to be applauded and well rewarded. It's really hard to do. Betterment, a U.S.-based advisory firm that targets young and inexperienced investors, signed up a 25-year-old Tennesseean TikToker with nearly half a million followers because he could do it, Bloomberg reports.
But for every clear-spoken, genuine and decent character on social media, there is a long tail of the mad, bad and outright dangerous. I asked my teenage son if he saw much finance stuff on social media, he smirked and said: "What, you mean like Sigma Male Grindset Culture?" It sounds superficially risible and a lot might be parody, but money-focused social media content can quickly turn unpleasant and wrong.
Social media sites feed you what you appear to enjoy to keep you engaged. This is a tried and tested business model. TikTok's algorithm sends users down rabbit holes with ever more extreme versions of the content that they like to consume, according to a recent Wall Street Journal investigation.
And what do these online rabbit holes look like in finance? Do they contain ever-more nuanced explanations of the tax treatment of different trust structures? Or something more like astrological influences on crypto prices and "Why your entire pension should go into this three-times levered zinc-futures ETF today"?
People will lose money. Suckers will get burned. Sigma males will LOL.
Regulators aren't totally blind to what's going on here. The U.S. Securities and Exchange Commission will soon publish a report into this year's GameStop Corp. saga — where a struggling retailer's stock was pumped up on Reddit and Youtube. SEC Chair Gary Gensler is concerned about fraud and market manipulation on social media, but is wary of impinging on free speech when it comes to stock recommendations.
