Nearly one in two Canadians invested without the help of a financial planner in 2023, according to the Canadian Securities Administrators’ (CSA) annual report released Tuesday. It attributes the increase to “rising inflation and the cost of living, which has led more people to seek new sources of supplemental income.”
“We note in particular that young investors prefer to manage their portfolio themselves rather than using a financial advisor,” writes the ACVM.
Investors aged 18 to 24 are increasingly turning to social media for investment information. “Platforms such as TikTok, Instagram and YouTube are popular among younger investors,” the report notes, with YouTube being the top source of online information for nearly every age group.
This new trend does not surprise Denis Schweizer, a finance professor at Concordia University. According to him, it is caused by “the lack of trust that citizens have in banks, particularly after the financial crisis of 2008.” He explains that people are instead looking to be independent of large financial institutions and not pay the fees associated with investments, such as the cost of buying or moving a stock. “That’s why cryptocurrencies, which are not controlled by financial authorities, are seeing so much enthusiasm,” he explains.
However, fraud carried out through social networks has nearly doubled since 2020, now representing 11% of securities fraud. It particularly affects those who have no savings, who invest without the help of a financial planner and who are looking for new ways to make ends meet, reports the CSA.
Many financial influencers post investment tips and tricks on social media aimed at generating money quickly. Alain Coën, a finance professor at the Université du Québec à Montréal, warns users of digital platforms: these influencers are not necessarily trained and may even be paid by a company to promote the purchase of their shares, he explains.
“What can interest young investors who do not have enough knowledge are precisely high returns,” notes Mr. Coën. “But if you have high returns, you can also have losses that are very high.”
Caroline Marion, a tax notary and trust manager at Desjardins, emphasizes the importance of consulting a financial planner to develop your investor profile. “Investing is a science,” she says. She also encourages young investors to take small amounts from their salary and invest them in investments that are appropriate for their investor profile.
Despite these risks, Denis Schweizer sees benefits to social media-driven do-it-yourself investing. The Concordia University professor points out that digital platforms allow ordinary people to invest. “It was a relatively select group that was investing back then,” he explains. “Now, everyone has access to analytics.”