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“The stock market is filled with individuals who know the price of everything but the value of nothing.”

Just a decade ago, investors relied more on traditional sources such as financial advisors, banks, established financial institutions and print media for investment advice. Fewer individuals engaged in investing activities beyond the usual categories of gold, fixed deposits and real estate, and people's knowledge of investments was generally lower. Today, the landscape has shifted dramatically with the rise of finfluencers. The term ‘finfluencers’ is a short form for financial influencers. These are individuals who use social media to share insights on various economic and financial trends. Finfluencers play a vital role in spreading financial information, making it more accessible and understandable for a wider audience.


A recent survey by the Indian Social Media Exchange (ISMX) found that 72% of Indian millennials and Gen Z investors use social media to obtain financial information and 63% of them have acted based on information from social media. This indicates the growing influence of finfluencers in shaping financial decisions among young Indians. These finfluencers can be primarily classified into three types- Personal Finance Finfluencers, Stock Market Finfluencers and Trading Finfluencers. While some of them function with the main aim of spreading financial awareness to help their viewers, others operate with the sole purpose of selling their products or courses to their customers.


Rise of Finfluencers

Even though business news channels and newspapers have been accessible to people for years, these platforms have been looked at as mere providers of financial information and not as sources of financial education. The major growth of finfluencers can be attributed to COVID-19, during the lockdown, most people were working from home and thus had more time to learn about finance and its related segments. Numerous people realised the value of investments and passive income, particularly after the economy crashed and many people experienced a pay cut or lost their jobs, leaving them without a reliable source of income. Several other factors also contributed to the growth of such influencers, such as the availability of cheap mobile data, the growth of social media, and the rise of brokerage platforms


Through the use of simplified language, relatable examples and engaging content, finfluencers help to break down complex financial concepts and make investing more approachable. For instance, in many videos, finfluencers roleplay scenarios that many of us have either already experienced or will experience in the future. These scenarios could range from a student taking an education loan to investing in an IPO or even retirement planning. Additionally, social media platforms' algorithms support these creators by recommending their videos to users who are looking for financial advice and guidance.


Demystifying Influencer Income 

Are finfluencers earning money through the tips and recommendations they provide to investors? One might assume that finfluencers are extremely well-versed in their domains, and are just disseminating the information that they use to make money. However, this assumption is far from the truth. Most of the finfluencers use a ‘hook strategy’, where they create interesting and attention-grabbing short-form videos that serve as a hook to capture the viewer's interest. By consistently uploading high-quality short-form content, finfluencers establish themselves as experts and cultivate a loyal following. Afterwards, they start promoting their longer videos within their short-form videos, where they encourage their viewers to check out more in-depth content on topics of a similar nature. This is where the real game begins. The possibility of earning a substantial amount of money through these short-form videos is very low. However, once the viewer has been transitioned to longer-form content, the whole landscape changes.


The primary source of income for these creators is social media engagement, which they build on platforms and is directly related to the number of views and engagement the creator has. Interestingly, a major portion of finfluencers’ earnings is through branded content and sponsorships, where the creator promotes a particular company’s product and encourages the viewers to buy the same. For instance, finfluencers commonly promote trading and investing platforms by specifying their features and benefits to consumers. Another common source of income for these creators is the promotion of their own paid courses, workshops, and webinars. These content creators urge people to pay for their exclusive material while withholding certain information from free-riders. Similarly, some creators offer a premium subscription to viewers, providing them with features such as Q&A, specialised insights, discounts, workshops, and access to exclusive community forums. Whether the market undergoes an upswing or a downturn, finfluencers are minimally impacted as compared to investors.

Positive Impact on Society

Even though the financial literacy rate in India is improving, it is still low in comparison to other developed and developing countries. Hardly any schools or colleges focus on these subjects, due to which many people are unaware of basic financial terms such as budgeting, compounding, bonds, etc.  In contrast to this, today’s generation wishes to be financially aware; they want to learn how they can be financially independent or how they can make valuable investments that will allow them to buy their first car. This showcases the huge gap that currently exists in our society. Nevertheless, efforts are being made by the Government and other institutions to solve this issue through new education curricula, workshops, schemes etc. However, this is a lengthy process, which prevents individuals from learning at their own pace.


Finfluencers play a vital role in solving this issue by creating free and personalised content that people can easily understand and relate to. Finance can be intimidating for many, but finfluencers break down barriers by demystifying financial jargon and processes. They communicate in a relatable manner, making financial information more understandable for the layman. These platforms allow beginners with little financial experience to establish a strong foundation that meets their objectives, without requiring them to spend money or register with a formal institution. Finfluencers have shifted the conventional mindset, where money was rarely discussed, to a society where people openly converse about relevant financial and investment topics with each other. Moreover, due to the large number and type of finfluencers present in the market, the investor has a wide array of options to choose from according to his preferences, needs, and goals. While a working person with children may want to learn about retirement planning, a young adult with big aspirations may want to learn how to trade in the stock market. This portrays the diverse nature of the world of finfluencers, which is filling the informational gap for individuals with varying financial interests and objectives.

Criticism of Finfluencers 

Not all finfluencers possess the required qualifications or credibility to provide advice to such a broad audience, and they may not exercise caution regarding the potential impact of their actions on investors. Every day we see videos of such influencers on our feed, but we hardly inquire about their qualification and registration details that are legally required.  This is where the problem arises. Novice and inexperienced investors do not pay heed to these details and end up succumbing to their emotions when encountering glamorous videos featuring fabricated success stories posted by creators to lure them in. There are several ways in which these influencers can negatively impact investors.  They might promote or collaborate with companies that are unregistered or are marketing products that are bound to make the investor lose money. Frequently, investors display loyalty and place trust in their favourite creators, thereby overlooking the implications before engaging with sponsored products.


For example, in 2021, a few prominent finfluencers were paid huge amounts for promoting Vauld, a Singapore-based crypto platform, and it was marketed as a safe and great investment that could give returns higher than the stock market. However, only a few months later the company suspended all transactions and investors lost lakhs of rupees, due to the carelessness of finfluencers. Further, several trading finfluencers charge subscriptions or premium from the viewer and add them to groups on Telegram and WhatsApp. These communities are used to share stock market advice, such as which shares are best to buy or sell. The investors are assured of guaranteed returns, but they lose money due to wrong tips, pump-and-dump schemes or manipulative practices. Traditional financial institutions and advisors are subject to stringent regulations, ensuring a level of accountability and protection for investors, but finfluencers are unregulated, which exposes the investors to a higher level of risk when dealing with them.

Navigating the World of Finfluencers

From my standpoint, investors must exercise vigilance by thoroughly examining all the facts and information associated with a particular investment before proceeding. While it's ideal for finfluencers to disseminate accurate and beneficial information, achieving a situation where this is guaranteed is not entirely feasible. The responsibility to conduct comprehensive research ultimately falls on the individual. They should prioritise verifying the credibility of the influencer from whom they seek guidance.  Those with a background in finance are generally considered more reliable. Similarly, when an influencer endorses a product or a service, it is essential to confirm the authenticity and legality of it with due diligence. Lastly, rather than relying on a single finfluencer as a source of financial information, investors should try to broaden their perspective by researching and considering the viewpoints of multiple people, which will help them filter through potential biases and make well-informed choices.

By Aryan Tara


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