Personal finance TikTok has become an extremely popular sub-category on the social media app: it is made up of experts who discuss financial topics ranging from stock trading to early retirement investment.
TikTok users are now being warned about misleading trading tips given on its mobile platform. The Financial Conduct Authority (FCA) is cautioning users to disregard creators who ‘promise high-return investments’ and to handle their investment decisions with care. Moreover, many of the creators who are jumping onto the stock market bandwagon seem to be unqualified in giving financial advice. They also repeatedly fail to inform the user about the level of risk involved in these investments.
According to Tech Radar, crypto exchange company Paxful investigated over ‘1000 stock-related TikTok Videos’ and found that 60% failed to provide disclaimers detailing the level of risk associated with a particular investment. They also found that 52% of the videos provided ‘misleading information’ about potential investments.
Moreover, even when a disclaimer is present, TikTok users cannot help but buy into the promise of wealth and good fortune that will apparently occur through a successful trade acquisition. Creators use this behavioral knowledge to position their videos as a get-rich quick scheme with tactics that include showing off purchases made through their trading decisions and flashing their most recent stock earnings and company profits in a bid for authority.
In order to protect their users, TikTok has started to remove any type of content described as ‘deceiving people to gain unlawful financial advantage’. Despite this move, TikTok users should still be cautious of any videos with potentially misleading financial information and to approach their investment portfolio with caution.