Social media users are being exposed to swathes of misleading financial advice – with potentially serious repercussions – on platforms like TikTok.

Research from UK-based Almond Financial found that up to 87 per cent of financial advice on TikTok was potentially misleading after a study of more than 150 videos ranging from tax advice to retirement planning.

Dr Angel Zhong, a financial academic from RMIT University, said that stay-at-home orders during the Covid-19 pandemic have accelerated the issue of young people receiving misleading financial advice.

“A lot of investors, particularly young investors, entered the stock, financial and crypto markets for the first time,” she said.

“This group of investors are young, they are heavy users of social media such as TikTok, and they don’t have much experience in formal financial education and advice.”

She said a major issue with online financial advice is the simplification of complex issues and topics.

“These TikTok videos are very short, from 45 seconds to a minute. I don’t think that financial concepts can be explained in that short amount of time,” she said.

“Putting aside the validity of the advice, what suits Investor A may not suit Investor B and the nuances cannot be explained in such a short video.”

Disclosure

Sam Robinson, principal financial adviser at Almond Financial, said the research shows people need to be vigilant about where they are receiving their information.

“TikTok is also home to lots of creators who make a living off selling online courses, e-books and more,” he said.

“We found that a lot of these accounts give especially poor financial advice, as their primary motivation for creating content isn’t to give sound advice to viewers but to sell a product that personally enriches them.”

The research found that only one in seven financial influencers were using disclaimers on videos or in account bios, whereas disclaimers are standard within the finance industry.

Zhong said that when financial influencers gain an audience, they are often approached by companies to promote products.

“A licensed financial adviser needs to disclose kickbacks and commission they receive if they recommend certain products that they have an interest in,” she said.

“It is also hard to trace because the story feature on Instagram means you can post something and it will disappear within 24 hours.”

Disappearing Instagram stories is one-way financial influencers avoid being caught breaking the law. Photo: AAP

Overseas advice

The 150 videos examined in the research had a combined view count of more than 78 million, while the accounts posting them had 28 million followers combined.

Zhong said ASIC issued regulatory guidance in 2022 warning that it is illegal in Australia to give unlicensed financial advice.

“It is detailed and outlines areas that influences would likely breach the law,” she said.

“After that regulatory guidance, a lot of influencers who I have been checking stopped, especially when it comes to financial products such as stock.”

She said despite this, cryptocurrency and overseas ‘finfluencers’ haven’t slowed down.

“Some of the influencers from the United States talk about tax implications, but they are in a totally different tax environment,” she said.

“When it comes to crypto, there is still so much to do to protect the financial wellbeing of Australians.”