The ‘finfluencer’ takeover of digital marketing

Betterment, the leading independent robo-adviser, is known for high-profile TV campaigns, including commercial spots during the U.S. Open featuring Maggie Siff from the hit Home Box Office Inc. show “Billions.” But no one in the marketing department of the 420-employee-strong company could explain how the platform registered 10,000 new sign-ups in a single day last March. 

Until they checked social media. 

TikTok influencer Austin Hankwitz had devised a plan to retire as a millionaire using the software and shared his strategy with almost 500,000 followers. Business was suddenly booming at the New York-based fintech.

"Right now we're seeing great conversion from our influencer program," Betterment's Arielle Sobel said in an email. "They often distill very complex financial ideas and make it easy and digestible for their followers."

Hankwitz is part of a new cohort of so-called “finfluencers” who are taking their knowledge and expertise of social media into the financial realm, breathing new life into stodgy prospecting campaigns that have largely relied on blog posts and dinner seminars promising free buffets. 

Employing social media influencers can be lucrative for the finance industry and cheaper than traditional media campaigns using TV spots or billboards. Hankwitz claims he takes in $500,000 a year from his social media work alone.

There’s also a direct avenue to retail traders. Hours spent on finance apps is up 90% year over year, while downloads of online apps jumped 20%, according to Bloomberg. Participation in the stock market through mobile phones also jumped, with hours spent on trading and investing apps up 135%.   

It’s the latest chapter in what some call a questionable marketing tactic used by almost all of the major robo-advisers: affiliate marketing. The strategy of tapping paid bloggers to attract prospective clients and paying for the new prospects may cross an ethical gray line, especially if those agreements aren’t made public to clients. 

The strategy of online affiliate marketing is completely legal, and the vast majority of the industry's leading players openly disclose their use of such marketers and do so compliantly. Many firms also acknowledge in corporate filings that affiliate marketing can carry conflicts of interest.

Still, Betterment’s West Coast rival Wealthfront was dinged $250,000 by the SEC for not properly disclosing how it pays for referrals from bloggers in 2018, among other things, in the first-ever legal action taken against a robo-adviser. The company retweeted client testimonials and paid bloggers without making the required disclosures, according to the Securities and Exchange Commission.

Wealthfront has partnered with about 15 influencers, including Haley Sacks, who's known on Instagram as Mrs. Dow Jones and has over 215,000 followers, according to Bloomberg. 

There are other drawbacks for investors, too. Some TikTokers have been documented pushing misinformation and unsuitable products with high fees to unsuspecting consumers, making it important for investors to know how to sift out accurate investing information from all the noise.

Like it or not, social media influencers are the new hot-ticket item in financial services advertising, and they’re likely not going away anytime soon.