Hi, how many of you make your financial decisions by watching influencers' videos on YouTube or Instagram?
Do you know whether the influencer in whose words you blindly invest your hard-earned savings in a stock or a financial instrument,
is that influencer capable of giving you financial advice or not?
After all, how do influencers make money by "influencing" you?
And which influencers are bad for your pocket?
We will understand this in today's video.
The Finance Minister recently said at a conference that Finance Influencers in India, fin-influencers have been the worst,
and people are losing their hard-earned money by blindly trusting them.
Whereas, fin-influencers are working for lakhs of rupees.
But why do people trust Influencers blindly, and how do Influencers themselves earn money?
Let's first understand that.
If you were to ask a 10-year-old today what he would like to be, there is a very high chance that he would not say a doctor or an engineer.
He will say "YouTuber" or "Content Creator" or roughly speaking, a social media star!
This is the effect of the "Creator Economy"!
You must have heard this term many times in the last 2 years.
Post-COVID-19, people started posting offensive content on social media platforms, they got millions of followers,
and today these so-called "influencers" are making lakhs of rupees.
Pay attention to the word "influencer".
The word itself is very powerful.
Think for yourself, the YouTube or Instagram videos you watch, you engage with its content.
Not only you, but millions of other people also watch their content with you, agree with them, and praise them in the comment section,
then if the same person tells you to put your money in an app or invest in a stock or some fund
because he thinks that doing so will make a good profit, there are chances that many people will listen to him.
Why? Because you trust them, and consider them smarter about finances, than any of your friends or relatives.
And the brands get their ads done by paying crores of rupees to such influencers,
or they open their demat accounts by making them their affiliates because they can "influence" millions of people.
There are primary 4 sources of earning money for a finance influencer.
You must have noticed that finance influencers in their videos influence you to open a demat account with some brokerage house.
Often you will find links to create accounts at different brokerages in the description of YouTube videos of Influencers.
Using these links, when you open a demat account with a brokerage, 10-30% of the brokerage generated on your every trade goes to Influencers.
This is an easy way for a brokerage to generate clients using referral marketing.
In order to make affiliate income, many YouTubers create content where they present a stock, fund, or scheme in such a way
that viewers feel that this is just a once-in-a-lifetime investment opportunity.
The more people in an affiliate's network trade, the more commission the affiliate gets from the brokerage house.
For this reason, it is in the interest of YouTubers that you trade frequently.
So as an investor, you always have to take care that you should never put your hard-earned money on one person's point of view.
If your favorite influencer is bullish about a stock, instead of betting on his/her excitement,
try to find out what are the red flags of this business, based on your YouTuber's optimism about this business or fund or scheme.
Read the annual and quarterly reports of the company
and take your investment decisions only after doing your research and not on the advice of a YouTuber or Instagram
because you never know what is the intention of an influencer to introduce you to a financial instrument.
We would also like to inform you that Groww is the only big discount broker
It does not give its customers' brokerage to any affiliate and we do not acquire customers through this brokerage-sharing model.
The reason for this is that we do not want anyone to influence our customers in such a way that they can get more commission.
Most experts believe that investors make money in the market when they trade and invest in stocks for the long term after a proper decision.
By repeatedly buying or selling shares, you cannot reap the benefits of compounding,
so always invest in “your” conviction and not in the confidence of any “social media personality”.
Another way for fin-fluencers to reduce income is through product placement.
When content creator talks about a brand or product in their videos, reels, LinkedIn, and Twitter posts, they often get paid by the brand.
In the world of marketing, this is called integration.
Youtube also asks its creators to use the "paid promotion" label on their influencer videos when doing such product placement.
It also happens many times that influencers mention a product or service in their videos in an unbiased way without taking money,
but it is very difficult to know what is true for you as a viewer.
So whenever you notice that an influencer is over-hypothesizing a product or service,
it could be that the influencer is making revenue from a source other than product placement from that brand/company.
The third source of income for Finfluencers is courses and workshops.
Today date, courses related to Investment/Stock Analysis/Valuation/ Personal Finance are sold on a subscription model by influencers.
The advantage of these courses is that they allow you to master a single topic by focusing well on it with a structured, module-wise approach.
Generally, the course does not contain any content that is not available for free on YouTube or other learning resources,
but when you pay for a course, you give more value to the course and its content than to free content.
Do and try to understand a subject well without getting distracted.
That's why there is always a small market for those doing paid courses.
Let us tell you here that instead of selling these courses themselves, many influencers also create courses for some other brand or learning platform,
where they will often get a chance to earn money from one time or one-time + monthly revenue share type model.
The 4th source of income for Finfluencers is to create content for other brands or appear in their content as an anchor, speaker, or educator.
Many popular influencers also charge to attend an online or offline event.
When you're a personality with millions of followers, every minute counts and it's fair only that influencers will charge for their time.
Many influencers also organize workshops or training for BFSI and Fintech brands.
The content mentioned in this training is often educational,
but if the influencer here is heaping praises on a particular scheme or a particular investment instrument,
and does not tell you the risks or disadvantages associated with it, then try to do your own research.
Also, know the risks and limitations of such devices.
Just because someone has millions of followers, doesn't necessarily mean that person is an expert.
So, this is the major way through which more influencers in India earn revenue.
Influencers also generate revenue by running ads on their youtube channel
but we think this income is much less than above mentioned heads, we are not covering it in detail.
Overall, according to our estimation, youtube income is not even more than 5-10% of a finfluencer's monthly income.
Till now everything is fine, that person made content by working hard, and won our trust.
So they have every right to earn money.
At the same time, there is also a responsibility on the Influencers not to give wrong advice to their followers in exchange for money. Isn't it?
But do you think that most influencers promote any brand, app, or financial instrument when they do their due diligence well or even can?
Now suppose there is a YouTuber who makes videos on investment and money management i.e. finance content.
Millions of views come on each of his videos.
Lakhs of people are taking advice from that YouTubers to manage and invest their money.
Now suppose tomorrow a new brand will come and tell this YouTuber that they will give 12% return to people on their app,
by promoting their app in his video, in return, they will give him 10 lakh rupees.
How many influencers would be in a position to properly verify the company and its business and do its due diligence?
As said at the beginning, as per Finance Minister Nirmala Sitharaman, only 3-4 out of 10 fin-influencers give genuine and objective advice today.
Recently it has also been seen that some influencers suggest buying a stock by taking money, which is part of a pump-and-dump scheme.
In pump-and-dump schemes, fraudsters themselves buy shares of a company for cheap, create fake publicity for that stock in the market,
and as soon as retail investors buy that stock, they sell it at a higher price.
And retail investors like us get trapped.
Also, there have been several scams related to Crypto in which influencers were seen playing the role.
This happens mainly in 2 ways.
The first is when an influencer promotes a coin instead of money which has no value in itself. These are also called shitcoins.
For example meme coins.
To give a recent example of this, when Queen Elizabeth of Britain died, more than 40 royal-themed meme coins were made,
Some of which had increased in value by up to 15,000%.
Just think about the person who would have invested in one of those coins at the top in the wake of FOMO.
Often the end game of such coins is a pump-and-dump scheme,
and those investors who invest their money in these coins without any research due to greed or FOMO, have to bear the loss.
The second is when an influencer promotes a crypto investment platform, and the same gets shut down,
due to which the entire investment of the investors becomes zero overnight.
For example, one such crypto-marketplace was heavily promoted by an Indian influencer who promised fixed returns to the people,
and the same promise of fixed returns was repeated by many influencers in their content.
But overnight this crypto exchange closed, and many people's hard-earned money got stuck.
Remember that platforms like Groww, and all other participants in the Indian stock market are regulated by bodies like SEBI.
There is no established ecosystem for a crypto industry where your investment is safe irrespective of platform closure,
whereas in the stock market even if your broker goes down tomorrow, your stocks are safe with CDSL or NSDL.
So the protection that you get in stocks or mutual funds will not be available in crypto, here you have to be extra cautious.
And finally, there is another scam that does not involve fin-influencers themselves, but their names are being used indirectly.
What happens is that the scamster will create an ID similar to the username of a famous influencer, copy the profile picture,
And will send you a follow request.
And then when you accept it, he will sell you some very lucrative trading strategy or course.
And I don't need to tell you that this is of course a scam.
Here you would think that such a big influencer is personally selling you his course or strategy, but you are actually being cheated.
Many influencers on Instagram report such accounts again and again, so that scamsters can't use their reputation to cheat people,
but many influencers are not so proactive, and who is at a loss in this affair? Retail investors like you and me.
So, friends, our purpose behind making this video is to alert you, not to spread negativity about Influencers.
Not all influencers are bad or irresponsible, and FM Nirmala Sitharaman also said that there are influencers who give objective advice.
But we should be very careful while taking any advice from anyone.
So we advise you to take the opinion of any influencer or so-called expert with a "pinch of salt" rather than taking it at face value.
Never rely on just one person's opinion and recommendations, talk to several people, and cross-check the facts.
And only after that, a decision will be made.
Lastly, a very important point -
SEBI has made guidelines for providing financial advisory in India, according to which SEBI also gives a Research Analyst certification.
SEBI conducts an exam for giving professional financial advice in India and by clearing that exam one can get SEBI certified RA license.
Apart from clearing the exam, there are other requirements like post-graduation qualification and a minimum of 5 years of relevant experience.
Unfortunately, most of the finance influencers in India have not cleared the exam and are not SEBI-certified RAs.
Still, a huge population of India is following them and taking investment advice from them.
As investors, we should go a step further
and qualify any influencer before following them – are they really experienced and qualified enough to offer advice on a particular topic?
After all, it is your hard-earned money, and you are the one to use, save and protect it.
Hope you got to learn something from the video.
If your friends or family watch videos of Social Media Influencers to make investment decisions and encourage you too,
please share this video with them.
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So who's your favorite fin-influencer? Tell us in the comments.
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Happy and safe investing, bye!