New FINRA Foundation Research Examines the Characteristics, Behaviors and Outcomes of Retail Investors Who Use Social Media

Younger Investors Turn to Finfluencers to Inform Decisions, but Face Knowledge Gaps and Elevated Fraud Risk

WASHINGTON--(BUSINESS WIRE)--The FINRA Investor Education Foundation (FINRA Foundation) released today new research, Finfluencer Followers and Social Media Scrollers: The Profile, Patterns, and Pitfalls of Social-Media-Informed Retail Investors.

The research examines retail investors who use social media and follow finfluencers to inform their investment decisions. The findings, drawn from the Investor Survey component of the 2024 National Financial Capability Study (NFCS), reveal that while social media is successfully engaging previously underrepresented market participants, these investors may also face elevated fraud risk due to knowledge gaps.

"This research shows that social media is a significant resource for investors, but it comes with both potential benefits and costs," said Gerri Walsh, FINRA Foundation President. "These platforms are drawing in investors who might otherwise remain on the sidelines, providing educational content and fostering community. However, the fact that many of these same investors exhibit low objectively-assessed investing knowledge, high self-rated confidence in their investing knowledge and are vulnerable to investment fraud raises serious concerns. This research underscores the critical need for more targeted financial education efforts to help financial consumers find unbiased information, better assess risk and spot red flags of financial fraud."

Key Findings:

• Demographics: Social media users and finfluencer followers were predominantly younger (60% of investors aged 18-34 use social media vs. 9% of those 55 or older; 61% aged 18 – 34 made an investment decision based on recommendations from a social media personality vs. 6% of those 55 or older), male, had lower portfolio values and were more likely to be a person of color than those who do not use social media or finfluencers to inform their decisions. Nearly half reported not identifying as "typical investors."
• Knowledge-Confidence Gap: Social media users and finfluencer followers often exhibited overconfidence, with more rating their subjective knowledge high while scoring low on objective investment knowledge tests compared non-users or non-followers. Social media users and finfluencer followers answered an average of 42% questions correctly on an objective investment knowledge quiz, yet 63% rated their investment knowledge as high.
• Fraud Risk: Social media users and finfluencer followers reported substantially higher fraud exposure and victimization. Among those who reported being targeted for fraud, 68% of social media users and 69% of finfluencer followers reported losing money to fraud (compared to 29% and 26% for non-users and non-followers, respectively).
• Information-Seeking: Social media users consulted an average of 7.6 information sources versus 4.0 for non-users and were more likely to check the background of a financial professional (36% vs. 14%).
• Non-Monetary Motives: Social media users reported significantly stronger motivations beyond profit motives for investing, including entertainment (59% vs. 18% for non-users), social activity (59% vs. 11%) and supporting personal values (66% vs. 31%).

About the FINRA Investor Education Foundation

The FINRA Investor Education Foundation supports innovative research and educational projects that empower Americans with the knowledge, skills and tools to make sound financial decisions throughout their lives. For more information about FINRA Foundation research and education initiatives, visit www.finrafoundation.org.

About FINRA

FINRA is a not-for-profit organization dedicated to investor protection and market integrity. FINRA regulates one critical part of the securities industry—member brokerage firms doing business in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.