Beware of influencers who close the gap in financial advice
Beware of influencers who close the gap in financial advice
Would you like to be financially free, build up your assets and retire at 30? Measured by the growing number of people who watch the video content of this kind on Tikok and Instagram and "like", the crisis of living costs increased the offer of those who are looking for a quick solution to their finances.
Follow some “influencers” and without exception you will find that the way to wealth is to borrow money and to invest it in risky assets or pay for a course to teach you trade secrets (spoiler: The only person who generates a passive income is the influencer whipping the entire affiliate marketing). Do you think that sounds like gambling rather than investment? Brother, you will be poor forever if you don't change this toxic way of thinking!
social media platforms are increasingly the place where people find out about money-even if a lot of what they “learn” will probably end in a disaster. But should the conventional financial world see a threat or an opportunity?
This week, the United Kingdom has taken steps to change the financial advisory landscape for the better. The Financial Conduct Authority has proposed new measures to better monitor online advertising for risky systems.
"Social media and online advertising mean that consumers need less time between the reputation of an advertising campaign and the meeting of a financial decision," says Sarah Pritchard, Executive Director of Markets at FCA, and indicates the increased damage potential because price increases are panicking and making quick decisions.
The supervisory authority has removed or changed more than 5,000 inappropriate financial advertising campaigns from FCA-related companies this year-about ten times the number that it removed it in 2021. Larger review powers will make it possible for her unregulated companies and influencers, whose advertising campaigns knock more on your fingers "gamification" without significantly marking the risks.
Great-but this still remains the huge crypto problem (currently outside the area of responsibility of the FCA) and an increasing flood of fraud, although the highly delayed online security law itself will force the platforms themselves.
An important reason why consumers rely on social media is the lack of affordable financial advice elsewhere. Only 8 percent of adults in the United Kingdom used regulated advice last year. The estimated "advisory gap" comprises 13.2 million British with more than 840 billion pounds of investable assets. Significant sums, but not big enough for many consulting companies.
This week, the MPs proposed a change to the Financial Service and Market Act, which would anchor a new category of advice- personalized financial advice.
While fraud and risky investments can do financial damage, you should not do this enough risk is also a problem - keeping too much money in cash or not investing enough to rest. Just as the automatic registration has successfully saved millions for saving, investment platforms could help customers make better decisions by combining platform data with knowledge from open banking, where customers can share their financial data with entries approved by the FCA and the upcoming pensions dashboard.
"The platforms can see who has cash and who is not sufficiently diversified," says Holly Mackay, founder of the Boring Money consumer website. "There is a great appetite in the entire industry to do more, but from a regulatory point of view this is a gray area, and companies are on the safe side."
But on the other hand, unregulated finfluencers are waiting. Personalized advice would help customers concentrate at a much earlier age, while there is still time to change the results. Sample portfolios could show you how you can better diversify your systems. Your investment and output data could be used to predict which type of retirement income could be generated from your existing pot and what it looks like compared to your daily expenses.
But there are restrictions. Advice is not a "advice" - it requires that individuals make decisions on their own will. If customers decide to invest more money or switch to payment for regulated advice, this will be a profit for the platforms. But how Mackay puts it: "Would the supervisory authorities prefer that people are completely wrong or are roughly correct?"
An area in which I would like to see these impulses is the threat from high investment costs. According to a study by the AJ Bell investment platform, the most expensive British tracker fund is 21 times more expensive than the cheapest.
platforms can see which of their investors keep the options with the worst value, so why don't they lead to a cheaper alternative? The same applies to “Closet Tracker” - active funds with expensive administrative fees that defend the retirement provision but do not do better than a cheaper passive fund.
financially resistant to build up its investments slowly and to calm down more conveniently at the age of 70 may not be memorable, but these are the messages that should have a much greater influence.
Claer Barrett is a consumer editor of the FT and author of "What they don’t teach you about money". claer.barrett@ft.com ; Twitter and Instagram: @Clearb
Source: Financial Times
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