The Power of Influence and the Art of Giving Advice
6 min read
I was 17 when I got my first mobile phone. It was a Philips “Savvy” which was a 2G device that could be used to send texts of up to 160 characters, had 25 preloaded picture messages and speed dialing for up to eight numbers. It was also ugly, bulky, and quite useless unless you had friends who also owned one. Fast-forward a few years and many individuals now use smartphones with instant internet access and multiple apps to help manage our lives and allow us to search for anything that may pique our interest. And, as I claim I’m only 21, this technology has certainly moved quickly!
The world at our fingertips
The expansion of internet access and the growth of social media apps has significantly increased the availability of financial guidance. In fact, Dimensional’s research1 found that 55% of investors under the age of 40 use social media when searching for financial information, and on average, the most popular platform was YouTube, closely followed by LinkedIn and Facebook.
But, in a world where anyone with an Instagram account or a YouTube channel could claim to be an expert, there should be a clear distinction between advice delivered by qualified and regulated financial experts and the unqualified, sometimes questionable, information offered up by a new breed of financial influencers. Indeed, the increase in influencers producing financial content raises important questions about the nature of advice and its regulation, as well as serious ethical implications.
Too much influence?
Despite the above, it must be acknowledged that financial influencers have successfully tapped into the pulse of the digital generation, with half of Millennials stating they would trust an influencers product recommendation2. At best, influencers simplify complex financial jargon into digestible content, making finance more relatable and accessible.
The appeal of influencers also underscores a significant disconnect between traditional financial advice and younger audiences. The average person spends about 145 minutes on social media every day and the most common way to access is via their mobile device2. Financial experts should recognise this shift in consumption preferences and adapt accordingly by learning to leverage social media platforms to educate, share insights, and engage clients in a way that resonates with them.
Advice vs influence
At the core of the financial planning profession is a deep understanding of personal finance, supplemented by rigorous qualifications, regulations, and stringent professional standards. Advisors are equipped to understand individual client’s needs, create financial plans, and employ them with appropriate products. They need to be able to address complex issues often straddling several disciplines from tax planning to investment selection. When asked in Dimensional’s Investor Study1, clients said the most valuable attributes of their adviser were they “understood my financial needs and goals,” could “explain financial concepts clearly” and offered a “sense of security and peace of mind”.
In contrast, financial influencers may lack formal qualifications or regulatory oversight. The information they provide, whilst it may be well-intentioned or even effective in certain contexts, such as encouraging good budgeting or savings habits, may not be universally applicable or address individual needs. More concerning is the potential for financial incentives to cloud the objectivity of influencers’ advice, particularly when it comes to promoting risky investments or schemes. Many influencers may have personal financial motives, such as referral bonuses or partnership deals, which can compromise the quality and objectivity of their advice.
Unregulated advice from influencers carries considerable risk. For instance, the volatile world of cryptocurrencies has attracted many with its promise of quick, dramatic returns. Some influencers have promoted these schemes and encouraged followers to partake without fully understanding the complexity or risk involved. Often there is no protection or recourse if things go wrong.
Influencing your marketing strategy
Notwithstanding the negative aspects of financial influencers, there is much we can learn from them, particularly around marketing and promotion. When asked in Dimensional’s Investor Study1, clients of advisors said they were most interested in seeing their advisor post online about general investment education, retirement strategies and current investment trends. Influencers excel at leveraging social media by creating engaging content and growing communities of like-minded individuals. It’s no surprise then that leading brands want to align with them – they can deliver a very targeted audience.
Here are some key strategies that financial advisors can incorporate to better promote their businesses:
- Digital first: Embrace digital platforms not just for brand visibility, but also to provide value-added content. Sharing insights, articles, market updates, and even live Q&A sessions can help connect with a larger audience and foster an engaged community.
- Content marketing: Influencers are experts in content creation, keeping it relevant, engaging, and easy-to-digest. Advisors can use this strategy to demystify complex financial concepts through blogs, infographics, webinars, or short video clips. This approach not only educates prospective clients but also establishes the advisor as a credible source of financial knowledge.
- Authenticity and transparency: Social media users value authenticity. Advisors can learn from influencers to be open about their process, share success stories and learning moments, discuss the state of the market, and address common financial concerns. This transparency helps build trust.
- Brand consistency: Influencers often have a consistent theme or branding across their platforms. Financial advisors can apply this strategy to create a recognisable brand identity. This consistency should extend to the tone of voice, visual aesthetic, and core messaging.
- Leverage social proof: Influencers frequently use testimonials and case studies to establish their credibility. Advisors can adopt this approach by highlighting client testimonials (with permission), thereby highlighting their expertise and how they have added value to their clients’ lives.
- Engagement: One of the critical successes of influencers is their high engagement rates. They communicate with their audience by responding to comments, seeking feedback, and even starting discussions. This two-way communication can also be beneficial for financial advisors, fostering stronger relationships and trust with their audience.
- Collaboration: Influencers often collaborate with others to broaden their reach. Financial advisors could collaborate with other industry professionals or businesses for guest blogging, joint webinars, or even cross-promotion of services, thereby accessing a wider audience base.
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The rise of social media presents many exciting opportunities for financial advisors to take inspiration from the influencers’ playbook to promote their businesses and cherry pick aspects that resonate with them. However, it’s important to remember that these strategies should be employed with a clear understanding of regulatory compliance and whilst always maintaining professional integrity.
Sources:
1 Results from Dimensional’s Global Investor Study. 19,875 end investor responses, collected between 1st January 2021 and 30th June 2023.
2 Top Social Media Statistics and Trends of 2023, Forbes Advisor. https://www.forbes.com/advisor/business/social-media-statistics/
