The Trust Factor: How To Decide When to Rely on Social Media or Hire a Financial Advisor for Advice

Gen-Z is getting their financial advice from social media, a report shows.

There are many routes individuals use to access financial advice, with some less credible than others. The internet and social media platforms are both quick ways to access advice. However, the downside is anyone can publish financial advice leading to the spread of misinformation.

After growing up in a digital age society, Generation Z seems to have an innate reliance on social media, which poses the question – does it leave them vulnerable to financial exploitation, and when should they turn to professionals like Financial Planners or Advisors to help them make money decisions?

Moneyzine.com decided to investigate the differences in accruing financial advice among generations. They found that 27% of Gen Z get financial advice from social media, higher than any other generation.

Gen-Z also thinks that social media is a reputable place to get financial advice, 31% of 18-40-year-olds describe themselves as ‘fully confident and informed’ when it comes to investing, in contrast to just 16% of 57-75-year-olds.

However, the study by Moneyzine also showed that one in four people who lost money to fraud in 2021 reported that this started on social media. Further, the number of under-20s falling victim to online identity theft has increased by 156% from 2017 to 2020.

Be Wary

Grant Maddox, CFP, AWMA, CSRIC, is the lead financial planner with Hampton Park Financial Planning, a financial planning firm focusing on Gen Z and Young Professionals. He says Gen-Z should be wary of whom they get their advice from online.

“Online financial advice is tough! Financial Planning is seldom a one size fits all approach. Therefore, those reviewing online advice should be wary of how the advice fits into their unique situation,” he says.

He recommends you do your research, “Those seeking advice online should be prudent in doing their research. Is the provider a trusted resource? What is their background? Can I find their information readily on FINRA Broker Check? These are all great questions to address when reviewing online advice,” says Maddox.

Learn the Basics

Matt Smith,  CFA, CFP, CIMA, CAIA, the Founder and Lead Advisor of Concert Financial Planning, LLC, say that “The proliferation and availability of financial information on social media can be wonderful for those that are interested in taking a first step in learning the basics and how they might apply to their own situation. The key is just to be aware of the motivations and expertise of the person giving the information.”

But beyond the basics, it may be a good idea to do a deeper dive, “In general, if somebody is selling a commissioned product like whole life insurance in a short TikTok video and making big claims, it’s probably best to do a much deeper dive into the salesperson and the product they’re selling before taking any action; you’re not getting the full story in such short format.”

Ask For Help

Smith says before you spend any money, it is time to ask for help, “However, if you are finding much more in-depth discussions that show both sides of the topic at hand (there are always pros and cons), you are probably in a better position to truly learn. Depending on your own interest and the expertise you develop, you can then either apply what you’ve learned to your own situation, or you can seek out the next level of advice from a professional. My two cents is to seek out professional help before buying a product or investing a dollar. Do it on your own if you’re exploring more basic strategies like how to budget. ”

Pros and Cons

Social Media is a good place to get basic personal finance education and learn more about topics you didn’t know much about. However, once you get to the point where you should be hiring a financial advisor, sites like Wealthtender can help you figure out how to find a financial advisor and figure out how much a financial advisor costs.

Jonathan Bird, CFP, Farnam Finacial, agrees with the duality of social media. He says, “What you see on social media is largely a function of what’s getting attention from other people, and that {the} is process doesn’t filter out bad financial advice. So for the average person, it’s likely that social media is the single worst place to get financial education. The popularity of now-failed cryptocurrencies and NFTs on social media is case-in-point. The answer is different if you know who to look for. Once you’re aware of who excels in personal finance and investing, you can search these people on social media and learn a great deal.”

 

This post originally appeared on A Dime Saved.

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