Beware of unqualified “finfluencers” and social media investment scams

Johannesburg - Tempting online adverts offering unrealistic investment returns have flooded social media in recent years. Many of these schemes operate without oversight, exploiting gaps in regulation to appeal to those desperate for rapid financial gain. Compounding this risk, is the role of unqualified brand ambassadors and "finfluencers", who promote these financial products as personal recommendations without any skin in the game.

"The issue is that social media influencers are typically compensated for their endorsements, but their followers often mistake these promotions for genuine, first-hand financial advice," warns Johannes Theron COO of Distribution at PSG Financial Services. "This creates a dangerous dynamic, blurring the line between unbiased guidance and deceptive marketing."

Theron adds that even if an influencer shares recommendations based on their personal circumstances, advice and recommendations around financial decisions and products might not apply to you as no two people have the same financial circumstances and goals.

Watch out for these four red flags

While some schemes are more sophisticated than others, Theron urges prospective investors to exercise caution and be on high alert for the following warning signs:

1. Unrealistic returns: Promises of high rewards with minimal or no risk.
2. Pressure to act quickly: Tactics designed to create urgency and push instant decisions.
3. Lack of credentials or transparency: Advisers or brand agents without qualifications, regulatory licences or ties to reputable financial institutions.
4. No independent verification: Limited background or client reviews, or an abundance of overly glowing reviews that appear to be bot-generated or unusually similar in nature.

"Scammers exploit emotional appeals and misinformation to lure in their victims," says Theron. "At the end of the day, the key to protecting yourself is to remain sceptical of any offers that seem too good to be true. 

"Unfortunately, once you've fallen victim, it's often too late to recover your losses, so it's crucial to avoid rushing into decisions and always question unsolicited or pushy offers," Theron reiterates.

The value of quality advice

To avoid falling victim to unregulated schemes or scams, Theron recommends working with credible advisers who can demonstrate affiliations with established financial bodies and have a proven track record of ethical conduct.

"Professional advisers are vetted and trained to offer tailored advice based on your individual financial goals and risk tolerance. While these advisers will certainly be able to guide you in achieving your financial objectives, they would never rely on pressure tactics and unrealistic promises."

At PSG Financial Services, the focus remains on understanding each client's unique financial circumstances and goals. "We believe in building strategies that prioritise individual needs and long-term goals," explains Theron. "Our advisers undergo rigorous ongoing training and are held to high standards of accountability to ensure clients receive transparent, trustworthy advice."

Amid the incessant noise of social media and the allure of quick returns, being able to distinguish genuine opportunities from deceptive schemes is becoming a critical part of building long-term wealth. "When making decisions regarding your finances, ensure that you speak to an accredited financial adviser, that will empower you to make informed decisions and prioritise safeguarding your financial future," concludes Theron.