Late last year, the U.S. Securities and Exchange Commission (SEC) announced charges against Kim Kardashian for touting crypto on social media while failing to disclose that she was being paid to do so. Kardashian agreed to settle for $1.26 million, but she is far from the only major celebrity to push crypto products without making it clear that their posts were sponsored. Just a few weeks ago, US football star, Tom Brady was sued for promoting the failed crypto exchange FTX. In addition, his own NFT, Autograph struggled and subsequently, made a lot of staff redundant.
Celebrity endorsements are not new, but they can be fatal to the financial wellbeing of those impacted when things to wrong.
The rise of personal media services such as TiKTok, Instagram, Twitter and now, Meta’s Threads means that there are more and more ways to be ‘influenced’. Plus, it can be tempting to follow the lead of others that have all the trappings of financial success (whether or not they do is another matter entirely). But one thing is for sure. Just because they entertain you, it doesn’t mean they can advise you, especially when it comes to your money.
Celebrities are required to make paid advertising crystal clear.
A note on the website of the Advertising Standards Authority of Ireland says it will be deploying Artificial Intelligence software to track if so-called influencers are in breach of the Advertising Code. Even within Ireland’s national broadcaster which is funded by license fee payers, there are emerging questions about the role of a privately run influencer factory.
With yields on saving and deposit accounts still hovering near zero, it’s little wonder so many people are tempted by promises of better returns. Inflation only exacerbates the problem as it reduces the purchasing power of money even more. Combined with the fact so many people in Ireland have low levels of financial literacy, it’s easy to see how people can be taken advantage of.
Be sceptical of celebrity and ‘guru’ advice
At the end of the day, celebrities and so-called financial ‘gurus’ are looking to pump their own bank accounts. They are paid to promote! Their job is to get their audiences to part with their money. And even if they do so with the best of intentions, they are in no position to have any level of understanding of the financial situation of their followers, the vast majority of who they will never meet.
So, before parting with your money, consider the following:
- Is this investment advice or a paid promotion? The bottom line it cannot be advice. To be advice, it would need to be based on a factfinding exercise to assess personal needs, wants and attitude to risk. So, it has to be a promotion, and a paid one at that!
- What are their credentials? Celebrities who endorse an investment often do not have sufficient expertise to do so. But even if they are qualified advisers, it doesn’t really matter. There are lots of examples of high-profile experts, with all of the necessary qualifications that have made massive mistakes…and lost a lot of money for their clients. So, be cautious and seek out a professional financial adviser that works for you, and puts your own financial needs first!
- Have you done your own research? If you are relying on a particular endorsement or recommendation, learn more regarding the relationship between the promoter and the company and consider whether the recommendation is truly independent or a paid promotion.
It can be challenging to build financial security. When it comes to financial advice, be prepared to seek it out and pay for it. That could be the best investment you ever make.
Frank Conway is founder of MoneyWhizz, the financial literacy initiative.