An increasing number of sharp-suited, seemingly successful financial influencers – often dubbed “finfluencers” – are flooding our social media feeds, appearing in countless posts, promising a fast-track to wealth through just a few easy steps.
Finance can be a complex topic to wrap you head around and although get-rich-quick posts may seem like an easy, quick way to make money, more often than not they are scams that can leave you even more out of pocket.
A survey of 1,800 social media users, conducted by Censuswide in June and commissioned by TSB Bank, highlights growing concerns around financial advice on social platforms. It found that 31% of respondents had followed financial tips seen on social media – and of those, 55% reported losing money as a result.
The survey also showed that social media can negatively impact users’ perceptions of their finances, with 43% saying they felt worse about their financial situation after viewing wealth-related posts.
Younger users were especially affected: 67% of those aged 16 to 24 and 61% of those aged 25 to 34 said such posts made them feel worse, compared to just 22% of people aged 55 and over.
While some finfluencers may be acting legitimately, social media is unfortunately littered with an abundance of incorrect information and unregulated investments that could derail your finances.
So, we got in touch with Beth Harris, head of financial crime at the Financial Conduct Authority (FCA), who explained how these scams work, and has highlighted some key red flags to look out for…
How do these scams work?
Get-rich-quick investment scams, also known as Ponzi schemes, pay returns to investors from their own money, or from money paid in by subsequent investors, according to Action Fraud’s website. There is no actual investment scheme as the fraudsters siphon off the money for themselves.
“Unlawful finfluencers will often falsely flaunt lavish lifestyles including expensive cars and exotic locations to draw people in,” explains Harris. “Consumers are promised guaranteed returns but in fact these can be highly risky investments or outright scams, and people risk losing their money.
“If they are dealing with an unauthorised firm or individual then they lose access to protections such as the Financial Ombudsman Service.”
Who are they targeting?
As these scams are primarily shared on social media, it’s often young people who are falling for them.
“Our research found that increasing numbers of young people are falling victim to scams, and unauthorised finfluencers can be involved,” says Harris. “Nearly two-thirds of 18 to 29-year olds follow social media influencers, 74% of those said they trusted their advice and 9 in 10 young followers have been encouraged to change their financial behaviour.
“While some will also be targeted as they ‘doomscroll’, with reels of content fed to them in response to their consumer profile.”
What are some red flags to look out for?
These get-rich-quick scams often attain a similar tone, phrases and characteristics, so here are a few warnings signs to keep your eyes peeled for…
Unrealistic promises
Get-rich-quick scams often use enticing promises of high returns with little effort or risk.
“Does the offer sound too good to be true? Fraudsters often promise tempting rewards, such as high returns on an investment,” says Harris.
Pressure tactics
Another common warning sign of a scam is feeling pressure to act quickly.
“Scammers might offer you a bonus or discount if you invest quickly, or they may say the opportunity is only available for a short time,” highlights Harris.
Investments that are impossible to understand
Take a moment to pause and reflect on the investment you are making. Make sure you fully understand what commitment you are making and where your money is going.
“Do you really understand the investment? We frequently see complex trading schemes being promoted that are fiendishly difficult to understand,” says Harris.
Where can I check a finfluencer’s or a company’s legitimacy before making an investment?
“Consumers should check the FCA’s Warning List before making any decision about how to invest their money,” recommends Harris. “We issued 2,240 warnings about unauthorised or potentially scam firms in 2024. Our InvestSmart page also contains useful information to help people make better investment decisions.”
What should you do if you have already fallen for a scam?
The FCA can investigate and take action against scams involving financial services they regulate, which includes scams related to investments, pensions, loans, insurance, and other financial products. All other scams should be reported to Action Fraud.
“If you’re worried about a potential scam, or you think you may have been contacted by a fraudster, report it to the FCA,” says Harris. “This could help prevent others falling victim. For anything we don’t regulate, or if you’ve lost money to a scam, contact Action Fraud on 0300 123 2040 or via their website.”
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