Are social media 'fin-fluencers' coming for your participants' 401(k)s?

(Bloomberg Opinion) — Social media’s next victim could be the 401(k). Finance influencers — or “finfluencers” — are becoming a hot new thing on social media sites like TikTok and Instagram. This may be the next big content moderation headache for the industry.

People who can translate the strange, technical language of finance and investing into something that is accessible and entertaining are bound to be applauded and well rewarded. It’s really hard to do. Betterment, a U.S.-based advisory firm that targets young and inexperienced investors, signed up a 25-year-old Tennesseean TikToker with nearly half a million followers because he could do it, Bloomberg reports.

But for every clear-spoken, genuine and decent character on social media, there is a long tail of the mad, bad and outright dangerous.

I asked my teenage son if he saw much finance stuff on social media, he smirked and said: “What, you mean like Sigma Male Grindset Culture?” It sounds superficially risible and a lot might be parody, but money-focused social media content can quickly turn unpleasant and wrong.

Social media sites feed you what you appear to enjoy to keep you engaged. This is a tried and tested business model. TikTok’s algorithm sends users down rabbit holes with ever more extreme versions of the content that they like to consume, according to a recent Wall Street Journal investigation.

And what do these online rabbit holes look like in finance? Do they contain ever-more nuanced explanations of the tax treatment of different trust structures?

Or something more like astrological influences on crypto prices and “Why your entire pension should go into this three-times levered zinc-futures ETF today”?

People will lose money. Suckers will get burned. Sigma males will LOL.

Regulators aren’t totally blind to what’s going on here. The U.S. Securities and Exchange Commission will soon publish a report into this year’s GameStop Corp. saga — where a struggling retailer’s stock was pumped up on Reddit and Youtube.

SEC Chair Gary Gensler is concerned about fraud and market manipulation on social media, but is wary of impinging on free speech when it comes to stock recommendations. However, this week, securities regulators in Massachusetts fined MassMutual $4.75 million for failing to supervise social media use by some of its agents, including Keith “Roaring Kitty” Gill, a Youtube finfluencer who helped spark the GameStop episode.

But that’s the easy part. Anyone who works for a regulated financial company can be quickly brought to heel through their employer. Another relatively easy part is ensuring that anyone who represents a commercial interest discloses that properly.

The hard part is all the other content — the thousands of accounts that might spout terrible investment advice people may actually follow.

Fools and their money are soon parted. And on social media you can reach a thousand fools before your first coffee. Irresponsible, unlawful, or just plain wrong financial advice could explode in popularity if it sounds fun.

Moderating such content might be less traumatic than the job of trawling for atrocity, but spotting bad or incorrect advice requires skill and knowledge. It could be more costly for social media companies.

So far, it is securities regulators concerned with the proper functioning of markets that have taken most interest, but consumer protection and financial conduct regulators should get involved, too.

Financial advice and marketing is rightly heavily regulated. Indeed, the authorities are the biggest finfluencers of all: They have punitive powers that have a more pointed impact than ordinary political voices demanding more be done about, say, hate speech.

When they demand solutions, social media companies will find them.

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