Under the finfluence
Paid ad or genuine advice? Young investors should beware social media's self-proclaimed finance gurus, writes Emma Rapoport.
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We've come to expect that the people pushing beauty products to us on social media are getting a kick-back for doing so. So ubiquitous have partnerships, endorsements, collabs and branded posts from our "trusted friends" become that genuine endorsements are accompanied with hashtags like #nopromo or "I swear I'm not being paid to say this". But is the same happening in financial services?
Since the GameStop saga, the world seems to have woken up to the sheer number of #finfluencers doling out financial advice. Head online, you'll find bright and beautiful Instagram accounts offering beginner guides to investing, YouTube videos on how to meal-prep your way out of debt, not to mention Facebook groups dissecting Afterpay's fortunes. And their modus operandi is usually reflected in their flip names. Girls Just Wanna Have Funds event organisers Ladies Finance Club (15k Instagram followers), adviser turned podcaster She's On the Money (88k followers), and Equity Mates with their slogan No Bullshi*t, No Jargon (~350k monthly downloads). If you know one, you know them all.
Most of these outfits are supported by major advertisers, in which there's no harm. To be clear, Morningstar is too, whether it's banner ads or email marketing campaigns. Social media endorsements, for example, can go from anywhere from $50 to $3k (per post). The intention behind these businesses may be altruistic, but they're not charities. Selling access to followers is a way they support themselves. But before you buy or invest in a financial product you heard about online, it's worth asking: is the person making the recommendation being paid to do so? And if so, have they disclosed that to me, clearly?
The line between post and promotion online is grey, especially when the finfluencer is the one presenting the promo. If a post is labelled "paid partnership" you're golden, but what about where a brand has sent a finfluencer something for free? Or where a webinar presenter has paid to be in front of you – has that been disclosed? Who is selecting the topic for a video — the host or an advertiser? Standards set by the Australian Association of National Advertisers (AANA) four years ago say social media influencers must CLEARLY label their sponsored content. If you ask me, burying "#ad" at the bottom of a post, or obscuring it behind a company logo (yes really) doesn't cut it. Followers action the advice they're being given. As they've been told — finance and investing is hard, I'm the expert, let me help you. But if the advice is stemming from a product provider, fronted by the finfluencer, this needs to be crystal clear. It's an ad, think about what they're not telling you.
As a millennial myself, I welcome these engaging personalities. While I'm often left questioning the accuracy of some of the "advice" being distributed on these platforms, as should you, they're trying to tackle Australia's long-running problem with financial literacy in a way some within the industry scoff at. Anecdotally, it's producing results. This is a group of people who most financial advisers are not ready to service and are desperately looking for guidance, women especially. I just hope they think deeply about who they're willing to lend their brand, and impressionable audiences too, and ensure their intention is known. The voices leading the next generation of investors matter.
With that said. In Firstlinks this week, forecasters are at it again, but should we take notice? Graham Hand urges investors to get into market specifics when surveying the wave of competing expert predictions for the year ahead. "One minute, a leading investment analyst says we are in a stockmarket bubble and then the next, another reports it's the best conditions for equities ever. Confusing?," he writes.
As we head into the final days of the February 2021 company reporting season, Marcus Padley takes a look inside the frantic world of stockbrokers and their struggle to cope with dozens of companies releasing results each day. Hand also hears Reece Birtles' take on 'value versus growth'. "It's another example of the stocks left behind in the rally, and the cycle is already showing signs of turning."
Elsewhere, Lex Hall surveys Morningstar analysts picks for four- and five-star energy stocks and asks: Should they be on your watch-list?
GameStop shares surged this week, again, and no one knows why. Morningstar's head of global ETF research Ben Johnson believes the best thing to do when the market is manic is a whole lot of nothing. "If there’s ever been a moment to tune out all this noise and drop these distractions, I’d argue it is right now. If markets’ performance over the past year has taught us anything, it’s that inaction is often the best course of action."
Columnist John Rekenthaler writes that his biggest investment lesson from the year the world stopped was that almost nobody can successfully forecast the direction of the stock market, including himself.
Australia’s housing market has been more resilient than expected. For that we have record low interest rates, multiple government home buyer and income support measures, pent-up demand from the lockdowns, and buyers’ fear of missing out to thank. With such a huge amount of money flowing into the housing market, banks and property developers are benefiting, writes Nicki Bourlioufas.
The covid-19 vaccine’s global rollout has coincided with rising bond yields, as investors anticipate higher inflation on the back of the expected post-pandemic recovery. Should fixed-income investors be worried? Anthony Fensom explores.
The current reporting season is being described as the strongest in 20 years with record earnings upgrades comfortably beating downgrades by a wide margin. Prashant Mehra delivers his final season wrap looking at why consumers remained king during the pandemic.
And finally, in Your Money Weekly, Peter Warnes explains why CBA and Macquarie hybrid issues have failed to excite. "Remember, everyone must make choices and decisions. These two offers make it easy. I would pass on both," he writes.
Quickly before you go, special guest Peter Warnes is joining the Morningstar Foundations of Investing Webinar series this Tuesday. He’ll give his unique take on the February reporting season (which ends today, finally) and answer all your questions. If you haven't already registered, don't miss out - Register now!
Morningstar's Global Best Ideas list is out now. Morningstar Premium subscribers can view the list here.