Personal finance influencers on social media — known as “finfluencers” — are guiding young investors often ignored by the wealth management industry with some helpful advice, according to a new report by the CFA Institute

They could also be violating advertising and securities laws.

That’s one of several interesting takeaways, highlighted in the slideshow below, from a January report by the institute’s Research & Policy Center. The report considers the contradictory impact, marketing implications to financial advisors, regulatory questions for the industry and behavioral investing trends at play amid the rise of finfluencers in recent years. The finfluencers posting on TikTok, Instagram, YouTube or other social media often draw more traffic than certified investment professionals’ channels. And they won’t be fading out of view anytime soon.

“Finfluencers will continue to disrupt the financial advice industry,” one of the report’s authors, CFA Institute Senior Head of Research Rhodri Preece, said in an email. “One of the primary barriers that Gen Z investors cited to utilizing a personal financial advisor was cost. Advisors can differentiate themselves by thinking about the long-term prospects of their client base, and while those Gen Z investors may not be viable clients today, it is unclear whether they will be in the future. By offering tailored information that comes with quality assurance, high levels of competency and duty of care, financial advisors can remain competitive in an increasingly digital world.”

The researchers conducted focus groups with younger European investors and analyzed a sample of 110 videos and posts across TikTok, Instagram and YouTube. Their findings and recommendations to the industry, social media channels and regulators carry more resonance in light of enforcement cases such as the Securities and Exchange Commission’s settlement last week with a fund company that partnered with Barstool Sports founder Dave Portnoy on an ETF launch or another one in 2022 involving Kim Kardashian’s work touting a cryptocurrency asset.

“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” SEC Chair Gary Gensler said at the time. “Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”

Advisors who face harsh regulatory penalties if they don’t disclose their conflicts of interest often point out the dearth of disclosures on social media, which is often effective at beaming out false information to millions of people at a time. Just 20% of the finfluencer content with what the researchers deemed to be an investment recommendation displayed any disclosure, Preece noted. And 47% of the posts or videos that had any form of promotion included disclosures about compensation or other conflicts. In other words, the amateur investment personalities may be engaging in conduct that would place actual professionals in legal hot water.

“The current landscape of finfluencer content lacks structured guidelines around disclosure,” Preece said. “More needs to be done across the industry to ensure there is a proper understanding of what constitutes financial recommendations and the disclosures that must be present in order to protect investors on social media.”

Members of Generation Z, or roughly those born in 1997 or later, often find investment information from these finfluencers, according to Preece, who explained that those disclosure responsibilities fall to firms in the industry that work with them as well. Still, he and the other researchers found some positive signs in the finfluencer movement

“It was encouraging to see through the social media content that we evaluated that finfluencers did demonstrate an interest in educating their followers,” he said. “The popularity of this content demonstrates a desire from young investors to understand and engage in the financial markets, which could represent an important opportunity for our industry as a whole.”

To see 16 key takeaways from the CFA Institute’s report on finfluencers, scroll down the slideshow. And follow these links for more analysis of investment advice on social media, connecting with new generations of clients and regulatory cases involving finfluencers:

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