We recently conducted a survey of 2,000 YouGov savers and investors to try and get some insight into attitudes towards online financial advertising.
Social media influencers are the least trusted financial advertisers
Thankfully, social media influencers are the least trusted to advertise financial products, with only 3% of those surveyed saying they trusted them. This is a relief because the majority of people on social media don’t have a clue about complex financial products and most are Instagram scammers anyway.
It was refreshing to note that when The Sunday Times Influencer List 2019, was released. There was nobody finance-related in it and they hadn’t unwittingly been hoodwinked into promoting investment scams.
That doesn’t mean to say that everyone on social media is a trickster. When we interviewed Raoul Pal, CEO of Real Vision, he recommended the FinTwit list as a great source of trading ideas and macroeconomic commentary. In fact, when you look at the recommended reading from all our CEO interviews, Twitter is a regular feature.
Regulated comparison sites are the most trusted source of online financial advertising
45% of those surveyed said they trusted financial adverts on comparison sites that were regulated by the FCA.
However, if a comparison site is not regulated by the FCA, that percentage drops to 4%, only slightly higher than social media influencers. Not surprising really, unscrupulous comparison sites acting as marketing agents for scammers promising high returns for bogus investment schemes. We covered this when we looked at bond scams and how investors were tricked into thinking they could get a return of up to 13% using mini-bonds.
I suppose this is because, if you are regulated you have to behave properly, have the relevant risk warnings and are in danger of either being finned, banned or generally ticked off. Which aside from being very embarrassing is not good for business.
In order to get regulated, there is a lot of due diligence conducted by third parties. Regardless of whether you are an appointed representative of another regulated firm, or have a direct regulation, it means that qualified compliance officers have investigated your business initially and on an ongoing basis.
Of course, being regulated isn’t foolproof as dodgy firms can still get it by getting regulated offshore and then passporting that regulation in. As many do from Cyprus for example where it is much easier to get regulated.
Financial adverts on search engines are only trusted by 9% of those surveyed.
This makes sense. It’s so easy to set up an AdWords account and start advertising on specific keywords and searches.
Not surprising as 43% of those we surveyed claimed to have seen a scam advert online. Google has banned cryptocurrency advertising, but adverts still slip though the net.
Scam adverts seem to be remarkably effective as between 11-18% said they have click on a scam advert, either out of curiosity or because they didn’t realise it was a scam.
Worryingly, only 20% of people said that when they saw a scam advert they reported it to the ad network with the “report ad” feature.
National press articles and financial promotions only trusted by 15%
Not surprising really at the click of a button anyone who can advertise on Google through Adwords can also advertise on the websites of newspapers.
But what’s worrying about this is the distinction between journalism and advertising. For instance, if a journalist or news feed displays an article or advertorial saying how great something is, I think you are more likely to believe it. Especially as major media networks have in the past been hoodwinked into unwittingly promoting investment scams.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.