🤑 Welcome to #FinTok
Gen Z and Millennials' new favourite TikTok trend.
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The Big Story
Megan Thee Stallion's Savage dance challenge.
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Milk Crate challenge.
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Since its release in 2016, TikTok has undergone several changes; it started as a platform where people could show choreographed dance routines, comedic skits, memes, and lip-syncs in less than 60 seconds. Fast forward to some years later, people started using it to explore lifestyle advice from influencers on a range of topics, including beauty, health, fitness, food, and travel, among others.
But 2020 arrived, and the world went berserk. The coronavirus pandemic shook global economies, leading to massive shutdowns and unemployment reaching its highest. Consequently, many households—with nowhere to be and nothing to do—turned to TikTok to find some comfort, and in the process, they discovered a new niche that quickly became viral.
Welcome to #FinTok
FinTok, A.K.A. Financial TikTok or StockTok, is a subcommunity where financial influencers (or finfluencers) discuss, advise, and educate their followers about finance and how they can grow their wealth. Essentially, these finfluencers explain complex concepts like tax harvesting, index funds, or passive investing into digestible 60-second videos by incorporating fun music, playful twists, and colourful captions. The only goal here was to make investment appealing to millennials and Gen Z.
And it has worked pretty well so far. In 2020, hashtags like #StockTok and #PersonalFinance surpassed 1.4 billion and 4.4 billion streams on the platform, respectively. What's more, a quarterly survey by E*TRADE Financial Corp reported a rise in risk tolerance among Gen Z and Millennial investors as 51% of investors under the age of 34 said that they invested in stocks. The study also showed that 46% of young investors started trading in derivatives since the pandemic began.
For finfluencers like Austin Hankwitz, this was great news. The 25-year-old finance professional from Tennessee quit his day job to focus on TikTok, and he now makes more than $500,000 every year just by making TikToks—more than some of Wall Street bankers. Another TikToker known as Mrs Dow Jones, who started her career in comedy, negotiates six-figure deals with brands for creating content that explains complex finance stuff using celebrity gossips and pop culture references.
This newfound FinTok boom was mainly due to one key feature: TikTok's For You Page. Unlike other recommendation algorithms, FYP intentionally includes a range of diverse and random videos on users' feeds, even if they're irrelevant to users. Because of this, finfluencers were able to reach a previously untapped market and pitch them their brands. While FinTok enjoyed this FYP-induced virality, it stumbled into a problem: unregulated influencers can engage in market manipulation by giving tips that benefit their investments.
To tackle this issue, TikTok launched the #FactCheckYourFeed campaign that posted a PSA on financial advice hashtags, reminding users of the investment risks involved. It also tightened its rules, saying it would take legal action against creators who post sponsored videos for financial services and products without clear labels. Since then, finfluencers have been shooting their videos and sending them to their respective brands to verify the details before posting.
On the bright side, the subcommunity has created a new space for seasoned advisors and investment firms to enter and educate the next generation of investors. Fidelity Investments, a Boston-based investment firm, is leveraging the platform to lure Gen-Z and Millennial investors with edgy videos. Plum, a UK-based fintech firm that helps people save money, saw a 180% increase in investments in the 25-34 age group as they turned to TikTok for financial advice amid the pandemic.
Although trends keep changing as time progresses, this one's certainly not going anywhere anytime soon, especially when cryptocurrencies are on the rise. And while TikTok has banned firms from running finfluencer campaigns, brands can still find some workarounds.
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