Financial ‘influencer’ or trashy guru

Attendees at the “Mundo Crypto” event, held last week in Madrid, listen to the speakers.Aldara Zarraoa (Getty Images)

Scientia potentia est. A famous expression —knowledge is power— that some people attribute in its origin to the English philosopher Francis Bacon; others, to the also British philosopher Thomas Hobbes, and some even, to an ancient Hebrew proverb (Proverbs 24:5).

That wisdom or information at the right time increases the chances of making the right decisions in the world of investment, bourgeois, merchants and financiers already knew it since the beginning of the 17th century, a time when the foundations of what is today began to be laid. are the financial markets. Even then it was relevant for them to be attentive not only to what was said, but also to who was saying it. There were born those who today we would call the first influencers financial.

It was important to know if this or that king was willing to ally with another, if one territory or another had expansionist desires or not, if the balance was leaning towards a certain contender in a battle, if storms were expected or not on the routes of the boats or whether or not a loan company had collection difficulties. Also then it was essential to distinguish whether or not the information came from the influential people of the time; in general, members of the nobility, high officials of the Court, seamen, merchants and bankers. According to chronicles of the time, there were also a good number of charlatans, cheats, crooks, liars, loudmouths, undocumented immigrants, impostors and tricksters who sold data, news and rumours.

In the 21st century, information and knowledge continue to give power to make investment decisions in financial markets that are already very large, developed and, above all, very fast. There are many “content generators”, as they are now called: from public bodies, financial institutions, companies and the media, through positioning agencies, analysts, specialists, managers, professors and experts, to the point where, as centuries, to swindlers, fraudsters and various profiteers. Many of them included, in modern terminology, in the profile of influencers financial, finfluencers either fininfluencers. Millions of people are the recipients of all this information. It must be recognized that, thanks to the social networks YouTube, Facebook, Instagram, Twitter, TikTok or LinkedIn and also to the dizzying development of new, simple and cheaper investment applications, their number has not only grown exponentially in recent years but it has also been rejuvenated by giving entrance to millennials, generation Z…

The point is that all of them face the arduous task of distinguishing the good financial influencer who helps in making investment decisions from the false financial guru who promises, on too many occasions, easy profits and in record time thanks to magic formulas. of dubious credibility that, however, have allowed them to simply become millionaires.

Rodrigo Prieto Garea is the account director of the financial communication division at Evercom, a specialist in fininfluencers and one of those responsible for the report Top 50 #Fininfluencers Spainwhich collects a list with the best influencers in different areas of the economy and finance, such as macroeconomics, monetary policy, markets, real estate, cryptocurrencies, financial innovation or personal finance. All in all, Prieto has no qualms about giving “always distrust” as his first piece of advice. From his point of view, it is essential to look at the professional career of those who express opinions and in no case get carried away by the number of followers of a certain profile. He explains that there are what are called “parody accounts”, accounts on social networks that use profiles of well-known people to make investment recommendations, “promising, yes, that whoever follows them can make a fortune”.

opinion and advice

Prieto calls these “vulgar cybercriminals”, who end up keeping other people’s money, especially, in his opinion, in the world of cryptocurrencies. For this communication expert, a good influencer is at the other end of the road. He is someone with experience in some segment of the stock market: “You can’t know everything,” he says; that he dedicates himself to it; that he has communication skills; that he is intelligent and that he effectively “gives his opinion; he makes no express recommendations to trade securities, currencies, commodities, or whatever is important at the time.” This difference between opinion and recommendation is what, in Prieto’s opinion, marks, on many occasions, the difference between influencers trustworthy or not.

In this regard, it recognizes that although national and international regulators, including the National Securities Market Commission (CNMV), have begun to issue serious warnings about those who give investment recommendations without clearly warning of the risks or without acknowledging that they are being paid For those they recommend, there is still “a long way to go” to try to protect investors, especially retailers and younger investors.

Jorge Garavito Acebes, who currently works in the sector of venture capital, is one of those young people attracted to the world of investment for a long time. Enough so that a few months ago he defended, with honors, his final degree project under the title The great financial influencers and their impact on the markets. Garavito acknowledges: “In essence, the very figure of the influencer The financial system collides with the principle of rationality”. He explains that certain figures are “followed” because in the past they were “right” in their investment decisions and it is believed that they can repeat success. “Actually, this doesn’t make sense in a context in which you have to be clear that past returns are no guarantee for the future,” he explains.

He adds, however, that in times of uncertainty such as the current ones, there is a good part of retail investors, which according to the markets represent between 20% and up to 30% of the total, “who are looking for more expert voices” to make decisions. . The problem, he points out, is twofold: on the one hand, long-term-oriented conservative views are rejected, in many cases from people with management experience, as “they seek to take on more risk.” On the other hand, opinions are sought that basically corroborate the line of action itself, thus finding justification for the decisions already made.

If there is something that is really surprising about Jorge Garavito’s work, it is that he only grants the qualification of influencer finance to the great world economic organisms. One of the main conclusions of his analysis is that “when the Federal Reserve speaks, when the European Central Bank advances its monetary policy forecasts, when the International Monetary Fund revises its growth forecasts…, then the markets do react. There is no institutional investor who ignores your data or comments. Seen from another angle, there is no great investor who can justify making a portfolio decision or another because he has been told by this or that expert for fininfluencer to be”.

Financial ‘influencer’ or trashy guru