Sarah Coles, head of personal finance, Hargreaves Lansdown: “Nefarious finfluencers are finding ways around the steps the FCA is taking to crackdown on financial fraud through online platforms. There are plenty of good actors in this space, offering sensible guidance from regulated people, but there are also a worrying number of people using this approach to defraud their victims.
A Treasury Committee session yesterday heard from Lucy Castledine, director of consumer investments and Steve Smart, joint executive director for enforcement and market oversight, both from the Financial Conduct Authority. They said scammers had taken to finfluencing after legislative crackdowns meant they moved from running boiler room scams or pension cold calling scams. They added that the move online put a younger demographic more at risk - raising the risk of fraud among those aged 19-40.
They explained that platforms put rules in place that paid for posts had to be placed by authorised firms. However, this has meant the rise of organic posts, which are being put up by scammers. They’re often based overseas, which makes it harder to prosecute them.
The social media platforms will take posts down and block accounts if they are identified by the FCA and a request is sent, but it can take weeks for this to happen, and the FCA said some platforms were slower to act than others.
Once an account is blocked, criminals are using a technique known as life-boating., They begin with a number of similar addresses, so when one is taken down overnight they can put the same content back up within hours on a similar account. Castledine said the platforms have the technology to identify this behaviour, and they could do more.
What can you do?
If you are seeing this kind of content online, ask yourself whether your expert really is an expert. There are plenty of people working for regulated businesses, or as independent professionals, who have built up vast banks of knowledge and experience – like financial journalists. However, on social media, there are others who aren’t regulated or qualified. They may not have much experience either.
There’s also plenty of content from people who are famous for other reasons, dipping their toe in money matters, but just because you’ve heard of them, it doesn’t make them an expert in this area.
High follower numbers can be misleading too. It means they’re good at social media. It doesn’t say anything about their financial expertise. Some experts online have huge, well-deserved followings. However, so do reality stars selling payday loans.
It can feel like a social media influencer, operating outside the traditional financial services industry, has uncovered a hack that breaks all the rules of finances to give you a head start. They may, for example, say they’ve found a way of making huge returns without taking a big risk.
However, it’s far more likely they have misunderstood something or are deliberately misleading you. They may also be talking up the benefits of an asset they already hold, in an effort to ramp up the price. The same basic rules apply to us all – higher potential rewards always come with a higher risk of loss.”
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