It can be hard to know who to trust in the investing world. You can find yourself wondering if that ‘investment guru’ has ulterior motives. Here are a few things to think about when deciding who you can and can’t trust.
Separating influencers from experts
If you’re eager to improve your relationship with money and build wealth, following money influencers on social media can be a great way to learn.
However, it’s important to separate influencers from experts so you can avoid making costly investing mistakes based on things you’ve read on social media.
Most money influencers (myself included) have no formal finance qualifications and aren’t qualified to give proper money advice. We can share general tips, yes, but we can’t provide personalised info or tell you what you should do with your money. Sometimes, even the most honest and conscientious of money influencers get things wrong and might share information that’s misleading not factually correct.
There’s no harm in learning from unqualified money bloggers or personal finance YouTubers but if an influencer’s selling courses, coaching programmes, or memberships to private communities, it’s wise to familiarise yourself with their qualifications and level of expertise first.
I personally would be very cautious about buying an investing course from someone who wasn’t qualified to talk about such a thing – even if they’d made thousands in the stock market themselves.
Be wary of anyone who describes themselves as a ‘money expert’ but doesn’t have the education or experience to back it up. I’m by no means an expert and I try to make that clear as often as possible.
Have influencers disclosed paid promotions?
Remember that influencers often make money through sponsored posts and affiliate schemes, so it can be difficult for them to approach certain topics from a truly unbiased point of view.
This certainly doesn’t mean they’re untrustworthy. Many podcasters, YouTubers, bloggers and social media stars genuinely care about their audience and are passionate about helping people improve their finances.
Besides, websites like Money Saving Expert are funded through affiliate links but Martin Lewis and his friends are trusted by millions of people across the UK.
Online courses shouldn’t guarantee results
Taking an online course can be a great way to learn about investing but make sure you do plenty of research before paying for one. Some people argue that you shouldn’t pay for online courses since there’s plenty of information available for free, but taking an online course can be a rewarding and fun way to learn – particularly if it’s offered by someone you like and trust.
Be wary of any online course creators who guarantee results or make bold claims about how their lessons will change your life. If they share photos of their own flashy lifestyle to lure people in, this should be a red flag. Ask yourself whether you’re being sold knowledge or a dream. If it’s the latter – run!
Facebook groups can be helpful – but also rife with bad advice and scams
Facebook groups can be a helpful resource for anyone eager to learn about investing, find out what others are doing, share positive and negative experiences and swap tips. However, Facebook can also be rife with misinformation, bad advice and scams. It can be hard to tell the genuine experts from the idiots and the honest beginners from the scammers.
‘Pump and dump’ scams are extremely common in groups where trading is a hot topic of discussion. This type of scam occurs when a fraudster pressures newbies into buying certain stocks in an attempt to drive up the value of their own investments. The scammer might say ‘Buy X now because it’ll double in value by lunchtime!’ Often, multiple people are involved in these pump and dump schemes, adding more pressure to wannabe investors, creating a sense of scarcity and causing a fear of missing out.
When beginners go ahead and pour their savings into the promoted stocks, the scammers sell their own shares and rake in the profits. Those left holding these often overpriced investments can be left with nothing, even if they invested hundreds or thousands of pounds.
The best groups are often the ones that have a zero tolerance approach to the sharing of affiliate schemes and links, because they’re quick to ban members who share anything that could cause others financial harm.
Be wary of any members who make promises, offer quick fixes, or say they’ll share their secrets with you via DM.
Be wary of pyramid schemes disguised as online courses
While online courses designed to teach you how to invest can be a legit way to learn, they can often be used as a disguise for harmful pyramid schemes that take advantage of vulnerable people. Eager to learn how to invest, many wannabe investors are signing up to costly training courses which charge them a monthly membership fee. Members’ fees are often waived if they recruit others into the scheme, meaning many people find themselves trapped in a cycle of promoting an online course which they themselves have learned little from.
Fronted by charismatic millennials telling tales of going from rags to riches, it’s no wonder that so thousands of people are signing up for these schemes. With so many people losing their jobs during the pandemic and looking for new ways to make money, these scams have taken advantage of their desperation.
Financial advisers are the only ones qualified to tell you what to do
At the end of the day, the only person qualified to tell you what to do with your money is someone with relevant qualifications and a thorough understanding of your financial situation. Hiring a financial adviser might sound like a luxury for the rich, but it can be more affordable than you think. A good financial adviser should be seen as an investment because they’ll save you money and make you money in the long run.
When choosing a financial adviser it’s wise to do some research and compare a few different ones first. You’ll need to know exactly how your adviser makes money. Is it just off the fees they receive from clients or do they also earn commission from recommending certain products and services to people? If it’s the latter, consider how this might influence their decision.