Many social media influencers with millions of subscribers to their accounts know little about managing their steady cash flow efficiently. Most of them hold their capital in bank accounts, where it sits idle, accruing little or no interest. Having little knowledge of finance, many of them eventually turn to wealth managers to get more out of their new-found wealth.
“Growing up, money was always an issue in our household, and as much as my parents wanted to be involved, they didn’t have any knowledge of investing or financial planning. It was also hard because I felt like some of the teams I met with didn’t understand my business or the digital media space,” Jenn Im, a 28-year-old YouTuber with over 2.4 million subscribers, told Business of Fashion.
Some YouTube vloggers earn millions by posting videos of themselves doing crazy things, like eating large amounts of food or fooling around. However, this industry is a serious business, and influencers can command huge fees for advertising products: the market is expected to be worth between $5 and $10 billion by 2020, according to estimates by Mediakix.
“Influencers realize they need wealth advisers early in their careers. They are equally serious about monetizing their brand as well as protecting and growing the money they earn from it,” John Mele of Morgan Stanley’s sports and entertainment unit said.
However, many YouTubers seek advice from companies that specialize in tax and business solutions specifically for influencers on this platform. They explain their choice with their lack of knowledge about other options, such as banks and traditional wealth managers.
The financial experience of many young YouTubers who became rich overnight is limited to checking their credit cards accounts, experts say.
“These are not people who had a lot of money and decided to start a business. This is pretty much first-generation wealth across the board,” commented Mike Bienstock, founder of Irvine, California-based Semaphore.
It all boils down to wealth managers coming across as authentic and being flexible. Influencers have lumpy income as it is based on the number of page views they generate, and social media users are unpredictable. Thus, they require a plan that can be easily adapted on a month-on-month basis.