Subscribe to Entrepreneur for $5
Subscribe

Personal Finance TikTokers Are Misleading Users, And the Problem Is Worse Than You Think

"StockTok" is inspiring young people to learn about investing... but what happens when the content is rotten?

By
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur United States, an international franchise of Entrepreneur Media.

Last month’s bizarre trading frenzy has prospective investors flocking to their favorite social media platforms to learn more about personal finance, market trends and wealth generation. But according to a new report commissioned by cryptocurrency company Paxful, some of the information on these platforms could be doing more harm than good.

SOPA Images | Getty Images

The analysis, which scraped and assessed 1,212 posts from personal finance influencers on TikTok, found that one in seven posts contained misleading advice. Opportunistic creators are capitalizing on this inbound traffic with a flood of investing recommendations, but many of these posts err on the side of false advertising and can actually expose a creator to potential legal action. 

Related: Reacting to Investment Advice TikTok Fails

On the one hand, I get it. As a business-oriented creator myself, I use content to help people make more money and attract new business, then sell stuff that helps these readers reach their goals faster. A lot of us put food on the table that way. 

Where the waters get murky is when creators begin giving and profiting off of advice that is normally regulated, particularly when their material and profiles have no disclaimers. Apparently I’m not the only person who feels this way; the Financial Conduct Authority in the UK has issued a statement warning citizens about the TikToks, while the Securities and Exchange Commission in the U.S. issued a more general announcement about market volatility. 

But can we live in reality here? No teenager cares about what these governing bodies say. My concern is that young people won’t pay attention to these warnings — I certainly wouldn’t have — and 69% of TikTok’s users are ages 13-24. This means that “StockTok” — the pet name for TikTok’s personal finance ecosystem — is creating misleading first impressions about personal finance for millions of young people.

Related: 3 Reasons TikTok Is Here To Stay

TikTok: Wired for virality, but also for misinformation

One of TikTok’s most powerful features is the ability for a video to go viral in a short period of time. This machinery is great for airtime, but it also allows misinformation to run rampant, and a recurring criticism of TikTok is that it’s been growing so fast it’s struggling to keep up with content moderation. 

Vox has a roundup of some of the most cringeworthy StockTok videos, including one video asserting that you pay no taxes when establishing your company as an S-corporation. As someone whose business is taxed as an S-corp, I can tell you this is absolutely not the case — I’m probably paying taxes as I type this very sentence.

Related: Before You Form an S Corp, Consider These Points

The methodology used in Paxful’s research assigned a video as misleading if one or more of the following criteria were met:

  • The video recommended investing in specific stocks, shares or other assets,

  • The video included a guarantee that the investment would make viewers more money, or

  • The video advised investing a particular amount of their savings or income.

Now, speculative content is certainly nothing new. A site like The Motley Fool has been an industry leader for market recommendations since 1993 and has incredibly persuasive copy. (These guys could probably sell me a box of lasagna noodles for the price of a Tesla if they wanted.) But even this flamethrower-strength sales writing is laced with necessary and appropriate legal disclaimers. 

Everywhere you turn, asterisks lead you to reminders that “past performance is not a predictor of future results, and all investing involves risk of loss.” I want this on these TikToks, and I’m not seeing much of it at the moment.

When opportunistic TikTokers make guarantees about assets over which we have little to no control, they’re not only harming their followers; they’re also opening themselves up to potential false advertising lawsuits.

Related: Snap CEO Evan Spiegel Says TikTok Could Be Bigger Than Instagram

How to be a content connoisseur

The sudden boom in financial advice feels like naivete, but the lessons learned can remind all of us to be more mindful about whose advice we put into our eyes and ears. As you decide which content creators to follow, here are a few things to consider:

  • Research an influencer’s “digital footprint”. When considering someone’s product, program or service, do a little homework to see what they’ve been up to online. If they barely existed six months ago… are they actually an expert?

  • Remain wary of vanity metrics. Fabricated follower counts are becoming the norm these days. Consider this a gentle reminder that follower count doesn’t mean more influence or experience.

  • Good content educates. True content marketing equips consumers with the information they need to make a clear and complete decision. Give someone a free piece of content that changes their life, and you’ll have a lifelong fan whose advocacy lasts way longer than the few bucks you make on your upsell.

Technology has certainly evolved over the years, but the rules for generating cash have remained largely the same. Instead of getting hotheaded about a volatile market, focus on what you can put in place today to start playing the long game for generating wealth.