Photo: 123RF
Young investors reliance on social media influencers for financial advice is raising questions about the quality of the information they are receiving.
A survey of 848 New Zealanders by price comparison website Finder found 44 percent of people aged under 25 got investment advice from social media.
It was the most popular source of investment information for this cohort and was closely followed by advice from family and friends (43 percent), the news (29 percent) and finance podcasts (28 percent).
By comparison, just 3 percent of baby boomers, 9 percent of Generation X, and 25 percent of Generation Y consulted social media for investment tips.
Finder investments editor Kylie Purcell said the rise of so-called "finfluencers" were a by-product of the "hustle culture" that had manifested online.
"Social media is full of finfluencers purporting to know which stocks are going to be the next big thing, but they often have no formal training in finance," Purcell said.
"In many cases they are actually trying to sell products such as an ebook or online course."
RNZ has reported on the rise of foreign exchange trading courses and cryptocurrency investment opportunities online that also doubled as multi-level marketing schemes.
Purcell said investors would be wise to take what they see and hear online with a grain of salt.
The same went for a circle of friends or finance podcasts, she said.
FMA manager of investor capability Tammy Peyper said its research suggested younger people already treated financial information they found on social media with a "healthy dose of scepticism".
"While the younger generation is consulting social media more [than other generations] there is still higher trust levels in what we would call 'traditional institutions', for lack of a better word," Peyper said.
"So yes, there is an up-tick, but we have found that this younger generation is savvy and they are consulting a variety of sources before making a decision."
The FMA released guidance on how people ought to talk about money and investing online without straying into providing unlicensed financial advice.
The watchdog said it was not above board to share factual information, such as describing a financial product's features or its terms and conditions, but people could get themselves into trouble if they made financial recommendations.
Similarly, the FMA said finfluencers should not promote products they did not understand and should stay away from talking about high-risk products, such as cryptocurrencies.
Peyper said from what the FMA had seen, finfluencers' conduct was above board and they were playing an important role in getting younger people to begin thinking about money and their futures.