NOTICE | Going to social media for financial advice? You must beware

While popular social media personalities may give you factual financial information, you need to be careful that they don’t inadvertently give you financial advice, says Gugu Sidaki.


I often scroll through social media platforms without commenting or posting – just observing how a typical South African interacts with financial products, service providers and personal financial information in general. From time to time, I also receive messages from people who want me to tell them what to do with their excess capital or what investment product to use – a very dangerous practice.

While it is encouraging that people are investing their money, the type of products and information people are accessing is still a problem.

The rise of personal finance influencers has done wonders to create awareness of financial products and the importance of personal financial matters. There are a number of very good personal finance advocates who have helped demystify the world of investing and have managed to connect with consumers in ways that our industry struggles to do.

This was confirmed in a recent survey conducted by The Collaborative Exchange and the Association of Black Securities and Investment Professionals (ABSIP), ASSUPOL, Momentum and Mianzo Asset Management.

Investors choose DIY platforms

It revealed a range of market insights into how black consumers accumulate savings and their attitudes and access to financial advice – many have access to financial advice but prefer to direct their own investments using platforms” new age” to access stocks and other investments. . Social media such as Twitter and TikTok have played an important role in influencing these investment decisions.

While popular social media personalities may give you factual financial information, you should be careful that they don’t inadvertently give you financial advice.

This is a problem because the Financial Adviser and Intermediary Services Act (FAIS) regulates financial products and advice on them. The FAIS law states that before you can give advice you must be licensed by the regulator of financial product providers, the Financial Services Conduct Authority (FSCA). Violation of this can result in a fine of up to R10 million or 10 years imprisonment or both – this is so serious.

What is advice?

What constitutes advice is often a contentious issue and most people are unaware of the definition and implications of breaking the law on the provision of advice.

A mere suggestion that someone should take up, cancel, or change a financial product or service in any way is advice, regardless of what someone’s Twitter bio says, and is against the law if it doesn’t. is not made in any specific way by a licensed professional.

Why is it important to do business with a professional?

There is still a lot of mistrust around financial advice. The industry has been blighted by rogue and bogus operators who have defrauded many unsuspecting consumers.

The survey conducted by Collaborative Exchange, ABSIP and others confirms that most South Africans who do not use a professional adviser do not know what the role of a financial adviser is.

Personal finance is exactly that – personal. What is right for one person may not be right for another and there are many things to consider before arriving at a financial solution. Your personal circumstances should always be carefully considered before financial advice can be given.

Having a licensed professional adviser means that you are dealing with someone who is competent and has complied with many requirements (and there are many!), including those relating to qualifications and experience, before to be able to talk to people about their money.

Licensed counselors are also required to have insurance to pay any claims, should they be found guilty of negligence in the performance of their duties. This means that you, as a consumer, are always protected when dealing with a professional.

What is the financial advice process?

If the financial advice is given correctly, the process is quite complicated. Before giving advice, the following questions should be answered:

  • How do you spend your money and how can this be improved?
  • What could go wrong in your life and how can these risks be minimized/eliminated?
  • What is the ideal outcome of your financial situation?
  • What influences your decisions about money?
  • What legacy do you want to leave behind?

Financial planning involves doing a comprehensive review of your financial situation and the steps needed to achieve your goals. Read more: What should a financial plan contain?

Financial planning often addresses several areas, including savings, investments, tax, retirement, estate planning, insurance, and more recently, psychology.

Once your financial plan is in place, it should be maintained regularly, in case there are changes in your situation.

More importantly, your financial advisor will help you monitor your behavior to ensure you stick to the plan.

Giving advice therefore requires a certain level of specialization, experience, skill and knowledge of the client. It should not be left to chance (or to social networks).

New-era investment platforms are great, and the ability to DIY your own investments is empowering. Many people successfully manage their own funds. But there is no substitute for good advice, and it is certainly not available for free on social networks.

Ultimately, what you want from the financial advice and planning process is an answer to the question “Will I be okay?”

If the answer is no, your financial advisor can help you determine the best way to get you on track, to stay on track, to be as good as possible under the circumstances. This peace of mind is priceless and should be left to a professional.

This article was first published on SmartAboutMoney.co.za, an initiative of the South African Savings and Investment Association (ASIS). New24 encourages freedom of speech and the expression of diverse opinions. The opinions of columnists published on News24 are therefore their own and do not necessarily represent the opinions of News24.