There’s an abundance of unregulated financial advice available, and research suggests it could harm your security and long-term plans. Whether you receive advice through social media or follow the financial decisions of friends, you could take more risk than is appropriate or miss out on opportunities.

Read on to discover some of the potential perils of taking unregulated financial advice.

Almost 14% of Brits use social media for financial guidance

Social media has become an important part of daily life for many. Indeed, it’s estimated that in 2022, 4.59 billion people used social media worldwide. So, it’s perhaps unsurprising that a growing number of people are seeking financial advice on social media platforms.

According to a study from Capital One, 13.7% of Brits use social media as a primary resource for financial guidance. Interestingly, men were twice as likely to use social media platforms when seeking financial advice.

While social media can be informative and may contain advice from experts, the research suggests it may be more likely to harm your wealth.

In fact, almost three-quarters (74%) of people who have taken financial guidance from social media lost money or experienced an “undesired outcome”, such as harming their credit score.

Social media isn’t the only place you’ll come across unregulated financial advice either. You might also speak to friends and family, hear advice in the media, or read blogs that offer guidance. So, it can be difficult to avoid unregulated advice, but recognising when it could harm your finances may be important.

4 reasons you may choose to avoid unregulated financial advice

1. You might not know whether they’re qualified or experienced

The Capital One research found that 30% of survey participants said qualifications were a sign of trustworthiness.

The Financial Conduct Authority (FCA) requires all regulated financial advisers to have the relevant qualifications. This means you can rest assured that your finances are in safe hands.

If you choose to take advice from social media or other unregulated sources, it can be difficult to assess the qualifications and experience that the person has. Indeed, the Capital One research found that 80% of financial content on YouTube was made by someone with no qualifications.

2. You’re not protected if something goes wrong

Taking regulated financial advice means you could be protected by the FCA if something goes wrong. All regulated financial advisers will have internal complaints handling procedures and, if you need to, you can approach the regulator.

In contrast, if you’ve taken unregulated financial advice, it might be difficult to hold the individual or firm accountable or get justice if you encounter a problem. For example, you might not receive compensation if you were given inappropriate advice or mis-sold an investment.

3. The advice may not be tailored to you

Watching a quick social media video might seem like a simple way to receive financial advice, but it’s important to note it hasn’t been tailored to you. As needs and goals can vary hugely between people, a one-size-fits-all approach could lead to some acting on advice that isn’t right for them.

Similarly, a well-meaning family member might offer investment advice that suits their needs, but that doesn’t mean it’s the right solution for you. A host of factors might affect your investment decisions, from your investment time frame to the other assets you hold.

Despite this, almost 20% of people told Capital One that their friends and family are their primary source of financial information.

Working with a regulated financial adviser means you have an opportunity to talk about your aspirations, concerns and wider finances to create a plan that’s tailored to you.

4. You could increase the risk of falling victim to a scam

It can be difficult to check the credentials of online personas. So, if you’re taking advice from online sources, you could be more likely to be targeted by a scammer.

The Annual Fraud Report 2024 from UK Finance also notes that scammers are increasingly using social media to connect with victims and gather information. For example, the report states that adverts on social media are “used heavily in investment scams”.

When seeking financial advice, you can use the FCA’s Financial Services Register to find the details of legitimate, regulated firms.

Contact us to talk about your finances

As regulated financial advisers, you can have confidence in the guidance we provide. If you’d like to talk about your financial plan, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.