A study conducted by the Ontario Securities Commission found that 35 percent of Canadian retail investors have made financial decisions based on the advice of financial influencers (finfluencers) on social media.
Finfluencers post about stock picks, alleged personal financial successes, and investment opportunities with limited windows on their social media platforms. According to the OSC research report “Social Media and Retail Investing: The Rise of Finfluencers,” retail investors are drawn to the informativeness, accessibility, and lack of cost for such advice.
Investors believed that finfluencers generally acted out of self-interest; nonetheless, around 40 percent of survey respondents considered the finfluencers they followed trustworthy. Investors who applied finfluencer advice to a financial decision were seven times more likely to trust a finfluencer they followed.
“Finfluencers have a clear capacity to affect their audience’s behaviour, and this influence could diminish retail investor well-being – especially if the advice is poor quality,” said Leslie Byberg, OSC’s executive vice president of strategic regulation, in a statement.
The study revealed that investors who relied on finfluencer advice to make a financial decision were 12 times more likely to fall for a social media scam.
In addition to the survey, the OSC conducted an online trading simulation in which investors and non-investors were presented with social media posts promoting a particular asset; the posts were similar to Reddit, X, and YouTube content. Almost 40 percent of participants exposed to finance-related posts bought the asset; among those not exposed, 10 percent purchased it.
The experiment revealed that non-investors were more susceptible to social media influence than current investors. Interventions somewhat limited social media content's allure but did not wholly remove the messaging’s effect.
The OSC survey was conducted with 655 Canadian retail investors, while 1,465 Canadian social media users participated in the online experiment to determine the effect of finfluencers and misinformation combat strategies. The commission worked with The Decision Lab to examine the relationship between investors and non-investors and the financial insights they are exposed to on social media.