It’s good to see the FCA finally showing their teeth and doing something about investing and trading scams on social media.
Especially as Instagram has now been usurped by TikTok as the latest playground for investment scammers.
I didn’t quite realise how bad it was until we started doing some social media ourselves.
Until recently if you wanted to provide unregulated financial advice to naive and greed investors Instagram provided the perfect platform. You could show images of supercars, fancy luggage and filtered snaps of you trading forex by the pool on a shiny laptop.
However, as Facebook (Instagram’s owner) has come under so much scrutiny for sharing absolute rubbish, thus making it hard to profit from scams, the scammers have moved on to the latest platform de jour, TikTok.
Even The Times has written the most ridiculous fluff piece about TikTok traders. Few from Gen Z will actually read it because I assume that not many subscribe. The article, whilst it does provide some insight about how trading works and the risks involved is more of a fluff piece designed to outrage READERS who will be affected by GREEDY youths. It is beyond belief how the broadsheets can be fooled by this. They even provide a link directly to the profiles of some TikTik traders.
How TikTok traders make money
Traders giving financial advice on TikTok make money in two ways:
- Advertising – earning the more people view the video
- Paid promotions – influencers are paid to say something or promote a brand
- Selling signals – selling trade ideas or educational programs
- Affiliate agreements – introducing new traders to brokers
Advertising is fair enough, it is, after all, an entertainment platform and to be fair, I spent a bit of time this morning watching the videos and some are hilarious. Selling signals is providing unregulated financial advice and is illegal in the UK. Affiliate agreements are the bread and butter of the financial services industry, however, no compliance from any FCA-regulated forex broker should ever allow paid introducer agreements from social media influencers.
CFDs, Forex, and derivatives trading is for experienced investors only.