Why Are Young Investors Flocking to Telegram & Discord for Financial Advice?
As the entire world increasingly transitions towards being cocooned in their houses, the popularity of live audio streaming platforms like Discord and text-based peer-to-peer communication platforms like Telegram are on the rise. However, where one would expect a rise of traditional entertainment and leisure activities such as stand-up comedy, gaming and movie reviews, GenZ and millennials are flocking to these services to seek financial advice from all parts of the world, be it in the US or Bangladesh.
Thus, in today’s post, I try to understand the many virtues of these online platforms which are contributing to this steady growth and the way that lies for the playing field between personalized financial advice and one that is mass communicated to a larger audience.
The Growth of Discord and Telegram
At the start of Q1 2020, both Discord and Telegram were registering a steady increase in their active user base, however as the pandemic forced nations into lockdowns and citizens were forced to silo at their homes, a predictable shift occurred across community platforms. Both Discord and Telegram recorded a significant growth in their user base throughout the latter half of 2020 and well into 2021.
In April 2020, Telegram, which is a community communication platform, had 400 million active users across the globe, and by December of that same year, the number of daily active users increased to 900 million.
The same story is being echoed across Discord servers, a live audio streaming platform which had a daily active user base of 100 million in 2020, and the number grew by over 40 million daily active users across the same period in 2021.
However, in contrast to popular belief, this tremendous growth of Discord and Telegram is not restricted to first world economies like the US and the UK. Bangladesh, which is set to graduate into a developing economy (from the current underdeveloped status) in the next 4 years, is registering the same growth in active user base across both Telegram and Discord.
The Rise of Financial Entertainment
As we have seen in the decades before, the growth of most social media platforms occur when their users have a lot of spare time in their hands. However, contrary to popular belief, where one would expect the growth of traditional entertainment verticals like gaming, movie reviews and stand up comedy, the new flock of members are being attracted by what proponents term as “financial entertainment”.
Financial entertainment in simple terms can be understood as being financial advice offered by the likes of millennial investors and traders packaged in the form of entertainment to an audience which is eager to learn and has spare cash in hand, owning to the diminish of spending avenues by virtue of the pandemic. Most of the channels and servers on Discord and Telegram are marked under the domain of “Entertainment” and offer a healthy dose of disclaimer, which reads, “Never invest in any security or cryptocurrency featured on our site or emails unless you can afford to lose your entire investment”, to its patrons.
As per a recent survey by the Wall Street Journal, most of these servers and chat rooms boast a regular presence of daily active listeners anywhere in the lesser thousands to a few hundred thousand. Generally, most of the financial advice on these streams strats by a user asking for a suggestion for an investment or a general query to understand a financial vehicle better, and from there, the conversation diverges as hundreds of members reply to the query from their personal experience.
Another form of session that is commonly practised across these chatrooms is where a speaker speaks of his experience in trading and offers insights on the investment vehicles they have chosen and the personal strategy which went behind that decision. One of the primary USPs of such rhetoric is the live experience, which most find to be more engaging than a pre-recorded session which does not have the advantage of getting questions answered in real-time.
25-year-old Tyrell Dukes, based out of the US, is one such speaker who speaks of his investment and trading experience on Discord. Next-Gen Investors, which was founded by Mr Dukes and four of his associates, runs a server on Discord which hosts a community of 4000 members. For a monthly subscription of $26, members can listen-in on these conversations, get their questions answered and avail mass communicated financial advice, which would otherwise cost them thousands of dollars.
However, unsurprisingly seasoned financial advisers are not pleased with this development. While there is an obvious loss in their potential pool of customers, most of the GenZ focused financial advisory institutions emphasize the fact that investment is just one component of an individual’s financial well being and point that out that the other proponents are sadly not available on these platforms, yet.
Along with this, in a recent interview to the Wall Street Journal, Jacob Gold, an associate professor of finance at Arizona State University, notes that since most of these young investors are being continuously conditioned to earning a profit of 30% on one time trades, there might be the potential of a permanent change in their behaviour dynamics and decision making towards investments, which is detrimental in the long run, as by counting out the odds, most trades, in the long run, generate a healthy return of 14% to 15% at maximum.
Setting a high bar of expectations would condition them to the fact that such returns from the likes of GameStop and Tesla are common, which in the long run could seriously hamper their financial goal planning.
The Way Ahead
In my personal opinion, investors solely trusting advice communicated on Telegram and Discord is a phase in their learning curve. Slowly but surely, they will learn that unprecedented gains are not common in the long run and conducting your own research before investing your hard earned money is a piece of advice they should seriously take to heart.
What do you think? Let me know by commenting below.