Dispelling the finfluencer myth: Be wary of misleading advice

Illustration: Ashish Asthana/Mint
Illustration: Ashish Asthana/Mint


  • Financial influencers have no special formula to help you make money
  • Finfluencers grew in popularity during the pandemic when people started working from home. Many mobile apps to buy and sell stocks emerged, making it easy to trade.

Mumbai: Scene 1: Rahul and Pooja were in a shack on the Palolem Beach in south Goa, drinking local feni, which they had developed some taste for, eating freshly fried prawns, taking in the fresh air that has gone missing in Mumbai and enjoying the beauty of the setting sun. Pooja was smiling and Rahul looked rather glum.

“So, what is it that you are not telling me?" asked Pooja.

“Nothing," replied Rahul.

“You know Rahul, don’t do to me what I do to you."

“Two weeks back, I had invested in this stock, Woodpecker Airlines," said Rahul. “As you know Woodpecker Airlines is on the verge of going bust."

“Oops," replied Pooja.

“Its stock price has halved in the last two weeks."

“We talk about everything Rahul," said Pooja. “Why didn’t we talk about this?"

“I wanted to surprise you."


“I thought that the stock will go up by the time our wedding anniversary and the holiday came around and we could then splurge."

“And how did you end up investing in this stock?"

“Oh, there is this financial influencer…"

“You mean finfluencer," interrupted Pooja.

“Yes," said Rahul. “So, this finfluencer named Tanmay Joshi, who goes by the name of TanJo on social media, had recommended it."

“And you just invested?"

“No. I asked my friend and colleague Ashish as well."


“He said, kar de, double hoga (do it, it will double)!"

The sun had just set and the sky was magical red; it often tends to be in Goa. Rahul and Pooja decided to go for a walk on the beach, hand in hand, with their feet feeling every grain of sand.

Scene 2

Rahul and Pooja had just ordered dinner at this fancy restaurant in Margao. While waiting for food to be served and sipping wine, they decided to continue the conversation.

“So, you just invested in Woodpecker Airlines because of Ashish?" asked Pooja.

“No, there are others in office also who follow TanJo."

“How did you trust TanJo?"

“As in?"

“Did he have a past track record?"

“Oh yes. He keeps sharing that on social media."

“Like how?"

“It’s an image which shows how much return his past investments have made."

“And how do you know that he invested when he says he did?" asked Pooja with a very penetrating gaze.

“Oh, he has shared some images from his demat account which show that."

“In this day and age, how difficult is it to fake such images?"

“Has he?" asked Rahul.

“I don’t know Rahul," replied Pooja. “But the point is that there is no way for you or anyone else for that matter to know whether a finfluencer is actually speaking the truth." She continued: “He might be, he might not be."

“But then, why do so many people in office follow him?" asked Rahul.

“Tell me something," said Pooja. “When did this TanJo guy start getting famous?"

“In mid-to-late 2020."

“That explains it."

“Explains what?"

“You know this was a time when most stocks were going up. In the short-term, you were more likely to be right than wrong if you just kept saying this stock will go up and that stock will go up."


“Which is precisely what many individuals who became finfluencers did. Some became crypto gurus as well, as crypto prices went up at an astonishing pace," said Pooja. “When the tide is going up, even if you stay still, the tide will take you up."

“I get it now," said Rahul.

“So, money wasn’t made because of insights offered by the finfluencer. The rising tide simply took everyone up."

The food arrived.

Scene 3

Both Pooja and Rahul were ready to call it a day. The food was excellent and the wine had made them slightly tipsy. Pooja had just finished oiling her air. Rahul was rather reluctantly putting aside this thriller he had been reading, the American writer Elmore Leonard’s Rum Punch, on which Quentin Tarantino’s movie Jackie Brown is based. He wondered if the book is better than the movie. He wasn’t sure, just yet.

“So, how do I trust an influencer?" asked Rahul, while switching off the table lamp.

“Theoretically, there are two ways," replied Pooja. “One is if you know the influencer personally."


“Yes. You need to be sure that they won’t recommend an investment which they personally wouldn’t invest in. It’s like the old assurance of ‘the owner of the hotel also eats here’, where customers see the owner eating the same food as they are. Also, only if you know him or her is there some likelihood of you knowing that they are actually making the investments they claim to."

“Interesting," said Rahul. “And what’s the second way?"

“The second way is to follow the influencer regularly and over a period of different market cycles be sure of what he or she is saying. Only then will you know whether the influencer is simply going with the flow or has something sensible to say."

“That will take a lot of time and understanding of things at my level as well."

“Yes, which is why, it’s not practical."


“Also, there is a structural problem built into the business model of finfluencers."

“And what is that?" asked Rahul.

“It’s almost midnight," said Pooja. “And after all that I have eaten today, I need to go for a run tomorrow morning."

“Yes, an early morning run on the beach should be fun."

Scene 4

Rahul was impressed with the massive breakfast buffet at the hotel. And like any good Indian tourist, he had filled his plate with everything from freshly made idlis on one side to chicken sausages and baked bean on toast on the other. Pooja hated this habit, and was giving him that look, while asking for a freshly brewed black coffee, with some soy milk on the side.

“So, what’s this fundamental structural problem you were talking about yesterday?" asked Rahul.

Pooja was irritated but decided to channelize this irritation on some other day. “What’s the business model of finfluencers?" she asked.

“They put out visual content. And get paid from YouTube/Instagram, etc., depending on the number of hits they get," replied Rahul.

“Right. So, they have an incentive in putting out more and more content because the more content they put out, the higher the chance of something going viral and bringing in the moolah. Given this, they are constantly putting out recommendations."

“That’s true."

“The trouble is that making money through investing is a long-term game. Big money is usually made by being patient over a period of time and allowing money to compound. So, the barrage of content asking you to do this and do that, goes against this basic principle. It’s a distraction."

“That makes sense," said Rahul.

“Also, there are brand tie-ups that finfluencers are not always transparent about. Like in the past, finfluencers have been paid to plug initial public offerings (IPOs) of companies. They have presented it as investment advice."

“Oh, I didn’t know that."

“Then, there is the case of stock brokerages paying them to incentivize their followers to trade more, something which makes sense for brokerages but not for investors."

“Oh my!"

“And then, during the crypto boom, they were paid to recommend stuff like crypto fixed deposits, which simply didn’t make any sense."

“I remember that."

“Then, there are those who try to project that they have access to some special formula which lets them make quick and easy money from stocks. Such individuals package this special formula in the form of a course and sell it to their viewers," said Pooja.


“If they have a special formula, why are they sharing it and why are they in the business of teaching? It tells you that they make money from selling courses and not any special formula."


“Some of them have even been caught front running, where they bought a stock before recommending it to their viewers. As the viewers bought the stock, the price went up, and the finfluencer made a killing."


“Basically, financial influencers have imbibed everything and more that isn’t right about the business of investing."

By the time Pooja finished saying this, her coffee had gone cold, and Rahul continued to talk and eat with his mouth full.

Scene 5

Rahul and Pooja are walking hand in hand on the Palolem Beach, sad that their holiday was coming to an end.

“You know, I was wondering why did finfluencers become so popular in the last three years?" asked Rahul.

“I think there are multiple reasons for it," replied Pooja.


“First, internet bandwidth prices have fallen rapidly over the years. Second, when the pandemic started, many individuals started working from home. Third, many mobile apps which allow you to buy and sell stocks have come to the fore. Fourth, as global central banks printed money to negate the negative economic effects of covid, stocks and cryptos rallied, and interest rates on deposits fell to all time low levels."

“How does all this link up?"

“Cheap internet and work from home allowed us to consume a lot of investment-oriented videos and reels. Most of this content catered to the lowest common denominator. It was very simplistic. And given that it was simplistic, many who consumed this content thought they were understanding stuff put out by the finfluencer. This led to the belief that the finfluencer is good and helped build trust. And this trust later led to investment actions."


“Many new mobile apps are very easy to use unlike the cumbersome demat accounts of yore. This incentivized people to trade more on the basis of recommendations made by finfluencers. Of course, working from home made this easy with no one looking to make sure that you were actually working."


“And as central banks printed money and pumped it into the financial system, stocks rallied. Then crypto rallied. So, people following influencers thought their investment strategy based on finfluencers made sense."


“Also, as bank interest rates fell, people were ready to take on greater risk to make a higher return. Finfluencers tapped into this as well by promising high returns through their way of investing. You know, when fixed deposits are returning 4-5% after tax, it’s very difficult to explain the concept of not putting all investment eggs in one basket or diversification. People don’t get it."

“Makes sense."

“And there is a final point. Most people aren’t serious about how, when and where, they go about investing their money. Like you invested in Woodpecker Airlines because Ashish asked you to. Or as my father keeps telling me about how in the 1980s and 1990s, everyone would end up buying insurance on the recommendation of a local guy who was friends with everyone in the locality. No one even bothered to figure out the rate of return on the investment."

“So?" interrupted Rahul.

“During covid, as people worked from home, this dynamic, where we look at people around us for tips to where to invest, sort of broke down. Of course, one could always call and ask, but it’s never the same as face-to-face. I think finfluencers filled this gap. They were like the modern-day version of the uncle who came every year to sell us an insurance policy."

“That’s some theory."

“Of course, as usual, the regulators took time to wake up to all this. Now they have woken up. But it remains very difficult for a regulator working eight hours a day, five days a week, to regulate finfluencers who can practically work 24x7, 365 days a year."

“Most of this stuff seems pretty obvious," said Rahul.

“Which it is."

“So, why didn’t people talk about it earlier?"

“Well, when the going is good, people are trusting. They don’t ask the most basic questions. It’s like the old Latin phrase, Mundus vult decipi, ergo decipiatur, meaning, ‘The world wants to be deceived, so let it be deceived,’" replied Pooja.

The sun had just set. The next morning, Rahul and Pooja will be back in Mumbai. And the rat race will start all over again.

(The example is hypothetical).

Vivek Kaul is the author of Bad Money.

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