The Kardashian Case: The Dangers of Money Advice on Social Media

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Obtaining – or giving – financial advice through social media is a tricky business.

Kim Kardashian this week agreed to pay $1.26 million to the Securities and Exchange Commission to settle a charge of illegal promotion of a company cipher security on social media.

Aside from celebrities, many of the influencers who give investment advice on social media these days care more about virality than anything else: they should be entertaining, easy to understand, and perhaps a little shocking. If you get a good win, it’s even better.

How many times have you heard any financial advice that meet those criteria? Learn how Debt repaymentSaving money or investing in the future is rarely funny, often boring – and it’s definitely hard to dance to.

It’s not about bad advice, it’s about transparency

The SEC says Kardashian received $250,000 for promoting EthereumMax crypto tokens on her Instagram feed. Her post said, “This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”

The SEC says the announcement contained a link to the EthereumMax website, which provided instructions on how to purchase EMAX tokens.

The SEC fined was not imposed because Kardashian was accused of providing financial advice but because the SEC said it did not disclose the “nature, source or amount” of what she paid for the position. Kardashian agreed to settle the matter without admitting or denying the SEC charges.

Obviously, Kim Kardashian knows how to make money. Nobody argues with that. Getting a quarter of a million dollars for an Instagram post is proof enough. But her path to prosperity may not be anywhere near bumpy financial road Many of us travel.

Who do you get financial advice from?

Celebrity endorsements are usually very benign. If we see a big star like Matt Damon, Steve Curry, or Tom Brady promoting crypto investments in a TV ad, we know it’s a paid component.

But social media can be less transparent, especially if the endorsement is from someone who is not famous but is no less serious or persuasive. Sometimes we mistake these lesser-known speakers for some kind of “expert”. But what do we really know about these promoters? Are they really wealthy and successful savers and investors? Or is this a paid idea or an uncommon idea that aims to generate thousands of views to make money?

These virtues are legally enforced.

Can you find good money ideas on social media?

Certainly you can. But if a social media influencer misleads you or misrepresents an investment, what is your recourse?

Registered and licensed financial advisors must comply with federal and state securities laws. Customer communications are monitored and approved. There are severe penalties for fraud or distribution of false information.

The Financial Industry Regulatory Authority, for example, says it devotes its resources to “implementing targeted enforcement actions… and rooting out the bad actors who pose the greatest risk of harm to investors and markets.”

FINRA, SEC and state authorities monitor the financial advisory industry. Investigations into advisor violations can result in fines and even compensation for affected investors. But if the TikToker, blogger, social influencer, or YouTuber you’re getting bad advice from is not registered or licensed, your options to correct the error may be limited.

Find out how influencers make money

Knowing that an investment idea is a paid presentation gives you context. It is not a recommendation. It is an advertisement. And if the influencer’s financial idea or budgeting process is designed to generate views, clicks, or subscriptions, it’s not reliable advice; It’s a show.

Questions to ask any counselor, licensed or otherwise:

  • Are you investing the same way you recommend? If not, why isn’t this (variable annuity, crypto token, structured note) a good idea for you too?

  • Would your mother recommend this idea? This does not always work. A fellow counselor once told me he would cut off his “mother’s legs” to get one deal or another. I’m sure he was joking – and maybe a little drunk from lunch – but it was a helpful comment, though.

  • Can you simply explain to me how to make money? Is it by selling to me (course subscriptions, product ads, authorized investments, insurance policies)?

When your desire for actionable financial assistance exceeds what you can find on social networks, consider seeking help from Fee advisor only Who works on a fiduciary standard – put your needs first.

Then, your social feed can focus on having fun.

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