OBSERVATIONS FROM THE FINTECH SNARK TANK
Should TikTok be banned in the US because it’s a national security risk? Or should it be banned as retribution for Chinese actions against US businesses?
That’s for someone else to decide. If TikTok is banned—for whatever reason—it will leave many Gen Zers wondering, “Now where do we go for financial advice?”
Gen Zers and Millennials Get Financial Advice on TikTok
How many young consumers turn to “finfluencers” on TikTok for financial advice? The answer depends on what survey you’re looking at.
A Vericast survey revealed that 34% of Gen Zers obtain financial advice from TikTok (in contrast to 24% who seek advice from financial advisors), while another survey from Current Account Switch Service found that, among 14 to 18 year olds, 58% followed TikTok finfluencers.
Who Are The Top Finfluencers On TikTok?
The top TikTok finfluencers have amassed millions of followers. Who are they?
Among the most popular are Erika Kullberg, a corporate lawyer with 9 million followers, entrepreneurs Mark Tilbury and Brandon Schlichter with 7.2 million and 3.4 million followers, respectively, and certified tax advisor Duke Alexander Moore with 3.4 million followers. Others are self-taught investors like nursing school graduate Jessica Ghaney and ex-pharmacist Alex Saunders.
What do TikTok finfluencers talk about? According to a study titled How to Make $1 Million in Thirty Seconds or Less: The Need for Regulations on Finfluencers:
“Generally, finfluencers discuss educational information on topics including investments, personal finance, credit card debt, 401(k)s, real estate, and negotiations. Some finfluencers have increasingly been telling their viewers that the artificial intelligence software ChatGPT can help them easily become millionaires by doing free labor for them, such as writing books and making YouTube videos.”
Is TikTok Financial Advice Any Good?
CNBC evaluated the financial advice from some of the financial influencers on TikTok and concluded it was hit or miss:
“Some of the TikToks provided factual advice in less than 30 seconds while others essentially made get-rich-quick suggestions without delving into any details.”
Rebecca Jennings and Emily Stewart writing in Vox cautioned:
“At its worst, Finance TikTok perpetuates financial myths, scams, and dangerously misleading information. What users end up seeing often isn’t good advice from trusted sources, it’s just one random person’s experience making thousands of dollars off buying and selling Tesla calls.”
Why TikTok Financial Advice Resonates
Critics—in particular, bankers and registered financial advisors—who bash TikTok-provided financial advice often fail to understand what motivates TikTok users to view financial-related content on the social media challenge.
While banks and investment advisors often focus on providing educational content designed to improve financial literacy, TikTok finfluencers entertain their audiences. And why not? The Current Account Switch Service study found that 40% of respondents are more likely to trust the influencers they find entertaining.
Should Financial Advice on TikTok Be Regulated?
Ironically—but not surprisingly—critics of TikTok finfluencers cite “prioritizing entertainment over reliability and trustworthiness” and creating videos that “encourage risky, over-simplified, and impulsive financial decisions.”
But is that really any different than what some old-guard brokerages are doing?
Fidelity Investments launched a metaverse presence called the Fidelity Stack which includes a dance floor, rooftop sky garden, and a game called the Invest Quest that, “provides a gamified financial education experience in Decentraland” where “users are traverse the building learning the basics of ETF investing while gathering ‘orbs’.”
Entertainment? Yep. Over-simplified? I would argue yes.
Tamra Manfredo, the author of the How to Make $1 Million in Thirty Seconds or Less study suggests that “finfluencers are also dangerous because of the structure of social media platforms themselves,” arguing that “generally, misinformation travels faster than truthful information.”
Nonsense. There’s no truth to Manfredo’s statement since no one can accurately: 1) measure the speed by which information travels, and/or 2) determine the difference between “information” and “misinformation.”
The crux of the regulatory question comes down to this: What’s the difference between financial education and financial advice?
Many of the top finfluencers claim they provide education—not advice. Is there really a clear distinction between the two?
Take Fidelity’s metaverse entry, Fidelity Stack, for instance. Isn’t Fidelity providing “education” about ETF investing in order to promote investments in ETFs?
Tamra Manfredo, the author of the How to Make $1 Million in Thirty Seconds or Less study suggests that “current SEC, FINRA, and CFPB regulations may be too stringent for non-professional finfluencers since those regulations are for professionals whose careers involve giving financial advice.”
She goes on to say, however, that “those regulations can be adapted and relaxed to workably regulate the unregulated finfluencers” and suggests regulatory language that defines what an finfluencer is and recommends that disclaimer notices be included in FinToks.
The Economic Impact of a TikTok Ban
Lost in the political battle regarding a TikTok ban is the economic impact a ban would have on finfluencers—and all TikTok influencers, for that matter.
A study conducted by CMC Markets in the fall of 2022 suggested that the top five finfluencers were earning between $275,000 and $750,000 per year. When I published that in September 2022, I got notes from a couple of them assuring me that they were making a lot more than that (how nice of them to rub my face in the dirt).
ZipRecruiter reports that brand-sponsored TikTok influencers’ average salary is roughly $55,000 with some making more than $100,000. The company doesn’t say how many brand-sponsored influencers there are in the US, although Statista reports that there are more than 100,000 worldwide.
Whatever the number, a TikTok ban in the US will certainly put a dent in many finfluencers’ wallets.
Where Will Gen Z Go For Financial Advice If The US Bans TikTok?
Maybe the better questions are, where will the finfluencers go—and will be they be able to take their followers with them?
Instagram would seem to be a logical place for the finfluencers to migrate to. But let me run this idea by you (them and Elon Musk): What about Twitter?
With Musk’s intention to turn Twitter into a super app—or if not a super app, then at least a financial services hub—having a slate of finfluencers on the platform could help jumpstart Musk’s strategy.
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