Viral but Vanishing: Investment Advisors, Social Media, and Regulation

Abstract

Over 60% of younger retail investors rely on social media platforms like StockTwits for trading insights, displacing traditional investment advice and creating a new form of financial disintermediation. This paper provides a novel contribution by examining how investment advice diffuses through financial social networks and how professionals navigate these platforms in an attempt to avoid disintermediation. Using StockTwits data, we identify users whose messages go viral, so-called effective influencers, and assess how network structure and message content shape influence. We find that professionals strategically assert dominance, being 366% more likely than regular users to post viral messages, while avoiding partisan or emotionally charged content. Despite this influence, their activity declined sharply after 2018. We show that this decline was caused by intensified SEC and FINRA oversight. Unlike historical patterns - where regulatory reforms typically prompt gradual behavioral change if there is a change at all - the StockTwits case reveals a strong and immediate regulatory impact. Overall, the findings suggest that regulation rather than platform design or user behavior caused disintermediation in investment advice, with important consequences for how retail investors access and interpret financial advice.