Brits are being urged to “check before they invest” after new research revealed almost one in five UK investors have lost money after acting on investment advice, tips or content seen on social media.
Research findings on social media influence
Research from investing and trading platform IG found that 41% of UK investors have acted on investment advice, tips or inspiration seen on social media. Of those who acted on social media investment content, 45% said they subsequently lost money, equivalent to 18% of the full sample. The average estimated loss among those reporting a loss was £802.
According to the data, social media is among the top five most common sources of financial information for investors. The findings have prompted IG to warn investors to be cautious when taking financial content at face value, particularly as social media becomes an increasingly common source of information about investing.
Pressure tactics and trust in influencers
The research, which surveyed 2,000 UK adults who invest, also found that almost two-thirds (64%) see financial content on social media at least once a week, including one in five (20%) who see it every day. According to the new research, 62% of investors said they've encountered pressure tactics in financial content online such as “get in before it’s too late” and “everyone is buying this.” The most commonly seen phrase was “banks don’t want you to know this,” encountered by 49% of investors.
Almost two in five (38%) UK investors said they trust investment advice from financial influencers on social media to some degree. Among those who trust financial influencers, 31% said positive comments from other users contribute to that trust, while 25% pointed to a large following. Nearly a quarter (24%) said screenshots showing a creator’s own investment gains made them more likely to trust them, while 21% were influenced by creators who appeared wealthy or successful.
More substantive signals also played a role. Some investors said they trusted creators because they were qualified financial experts attached to reputable finance brands (34%), had verified credentials (32%), or clearly explained the risks involved (42%).
IG's warning and awareness stunt
Chris Beauchamp, Chief Market Analyst at IG, said: “There have been people giving out stock ‘tips’ for as long as investing has been around, but the rise of social media means that a whole new generation is being exposed to the risks of taking unsolicited advice. It’s easy to find this content online. In fact, it’s probably impossible to escape it.
“There are also some brilliant financial creators doing a great job of making investing more accessible and helping people understand their finances, and we shouldn’t lose sight of the positive role they can play. But our research shows this content isn't simply being seen - it is influencing investment decisions, and for too many people that can come at a financial cost.
“The answer isn't to tell people to ignore financial content online. It’s to encourage people to question what they see, check the source and understand the risks before they invest. That’s why we’re encouraging everyone to check before they invest.”
IG is urging investors to check credentials, do their own research and consult the Financial Conduct Authority’s Warning List for any warnings about the influencer or firm. To raise awareness of the risks of taking financial advice online at face value, IG also launched a stunt outside Battersea Power Station Underground station in London in order to highlight how easily people can become the target of misleading financial content.
