Why You Should Be Suspicious of Celebrity Financial Advice
Earlier this month, the U.S. Securities and Exchange Commission (SEC) announced charges against Kim Kardashian for advertising cryptocurrencies on social media without revealing that she was being paid to do so. Kardashian agreed to settle for $1.26 million, but she’s far from the only major celebrity to promote crypto products without making it clear that their posts were sponsored. And that’s not to mention the fact that these crypto assets later fell in price .
We recently explained why you shouldn’t listen to “financial gurus” and touched on similar issues when it comes to advice you can get from the “experts” on TikTok . That’s why you should also think twice before following crypto advice (or any financial advice) from your favorite celebrities.
Celebrities have a duty to make paid advertising crystal clear
The Securities and Exchange Commission states that celebrity investment advertising may be illegal unless it is clearly stated that it is paid advertising. This has been true of all kinds of investment advice in the past, but SEC warnings are increasingly focused on celebrities promoting assets in the highly volatile world of cryptocurrencies. Unfortunately, the “#ad” in the corner of an Instagram video is often overlooked.
“It’s a very speculative asset class, so when a celebrity or influencer advertises it, it’s important that the public understand the relationship and are they getting paid for it? And how much do they get paid on their Instagram site? That’s what it was about,” SEC Chairman Gary Gensler said in an interview with CNBC about the agency’s allegations against Kim Kardashian.
Be Skeptical of Crypto Tips
After all, celebrities will give advice that is better for them than for you. Here are some things to keep in mind before following celebrity advice, according to the SEC :
- Is this investment advice a paid promotion? Investors should be aware that celebrity endorsements may appear impartial but may instead be part of a paid promotion.
- Do you have other reasons for this investment? Investment decisions should not be based solely on the approval of a promoter or other person.
- What are their powers? Celebrities who approve investments often do not have sufficient experience to ensure that investments are appropriate and comply with federal securities laws.
- Did you do your own research? If you rely on a certain endorsement or recommendation, learn more about the relationship between the promoter and the company and consider whether the recommendation is truly independent or paid.
Money.com agrees : “Listen to the experts who recommend doing your own research rather than taking your favorite celebrity’s word for it,” who is most likely being paid to tell you what a company wants to hear. And remember that compared to stocks and bonds, cryptocurrencies are especially risky . If you’re going to take this risk, make sure you’re well-informed and don’t let paid celebrities be your guides.