Think twice before taking business finance advice from TikTok

Social media is brimming with advice. But while they were once limited to lifestyle hacks, it seems influencers are now giving out business finance tips. And not all of it is golden.

The Financial Conduct Authority (FCA) has recently clamped down on illegal financial promotions by so-called “finfluencers”, or finance influencers, following repeated warnings and growing concerns around the spread of misinformation online.

When navigating the world of self-employment, sole traders and freelancers are increasingly turning to TikTok and Instagram for advice on taxes, cash flow, and investing. But in blindly taking financial advice from strangers on the internet, many risk getting burned.

What’s happening with finfluencers?

The FCA’s latest action is tackling the phenomenon of ‘finfluencing’. It refers to social media influencers who position themselves as financial experts and offer money advice, or promote products, without proper accreditation.

Regulators across Australia, Canada, Hong Kong, Italy, the UAE and the UK took part in the action, which began on June 2. Following the investigation, the FCA has:

• Made arrests and authorised criminal proceedings against three individuals
• Interviewed four additional finfluencers
• Sent seven cease and desist letters
• Issued 50 warnings

One previous case highlighted by the FCA features Emmanuel Nwanze and Holly Thompson, who used Instagram to provide advice on buying and selling contracts for difference (CFDs) without the proper authorisation to do so. Mr Nwanze and Ms Thomspon are facing trial, along with a further seven finfluencers, for their involvement in promoting the scheme.

The group is being charged with unauthorised communications of financial promotions under Section 21 of the Financial Services and Markets Act 2000.

Why small business owners should be cautious

It can feel like an easy fix, and even empowering, to manage your own finances with tips from TikTok. Many sole traders are already doing so, due to financial constraints and the widespread accessibility of social media advice.

That said, many influencers are not qualified accountants or financial advisers. They’re also unvetted and unmonitored by any official bodies, leaving them free to promote whatever they like online. And that could be a high-risk investment scheme or questionable tax strategies.

In the pursuit of financial wellness, many sole traders may be tempted by quick hacks, like dodgy expense write-offs or crypto investment. One wrong move could lead to fines or legal action, so it’s important to approach financial advice with shrewd judgment.

Better yet, leave it to the professionals. Business finance, especially as you grow, requires tailored advice. One-size-fits-all money hacks are often nothing more than bids for engagement, and HMRC won’t accept “I saw it on TikTok” as an excuse if things go south.

How to spot bad financial advice online

In the middle of an unrelenting cost-of-living crisis, it’s understandable that sole traders look for affordable advice. But social media can often be risky terrain.

It’s not to say every ‘financial expert’ on social media is bogus. But you should always remain critical when taking money advice from an unverified source.

Red flags to watch out for include influencers who promise guaranteed returns, push products without disclaimers, or avoid regulatory terms like “financial adviser”.

Personal finance content has its place. It offers general information and tips about managing money. But regulated financial advice is personalised and specific to your circumstances and goals, provided by a professional. Only the latter should be used for business advice.

If you don’t want to say bye to your favourite finfluencer, you can cross-check any tips with trusted sources, such as Gov.uk, or a licensed accountant to be safe.

You can also find tips on how to find a small business accountant in our expert guide.