Be Cautious: Signs of Unreliable Financial Advice from Social Media Stars

Recent research conducted by Generation Lab and Morning Brew has revealed that nearly 20% of university students acknowledge relying on social media for financial guidance. Particularly, TikTok has emerged as a prominent platform for financial advice, capturing the interest of approximately 34% of Generation Z, as reported by SmartAsset. The hashtag #FinTok has garnered over 4.5 billion views, establishing itself as the emblem of the financial advice community on TikTok.

While social media can provide valuable insights into personal finances by offering easily digestible information, it also presents a considerable risk of disseminating misinformation. According to Brian Walsh, a certified financial planner at SoFi, social media is perceived as both a blessing and a curse. The low barriers to entry make it challenging for individuals to distinguish reliable financial guidance from potentially harmful advice.

As social media increasingly becomes a primary source of financial guidance, it is imperative to discern credible advice from potential scams. There are three warning signs to be mindful of when evaluating the reliability of a financial influencer’s advice.

Firstly, if an influencer’s recommendations seem too good to be true, they likely are. Any form of get-rich-quick scheme typically signifies unreliable financial guidance. Secondly, financial influencers who advocate for extreme and absolute solutions, particularly in the realm of debt management, should be approached with caution. Lastly, influencers who promote a one-size-fits-all solution for every financial problem may not provide the nuanced advice necessary for individual financial circumstances.

When appraising the credibility of a financial influencer, it is crucial to consider their credentials. Ideally, financial influencers should be recognised as financial professionals, a fact they would typically disclose in their profile. Professional credentials such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) indicate that an individual has undergone specific tests and certifications in the financial industry, lending credibility to their advice.

While social media can offer general financial tips, seeking advice from a financial professional is advisable for specific financial concerns. It is also essential to corroborate the background of a financial professional using resources like BrokerCheck to ensure they possess a clean track record.

Furthermore, it is essential to comprehend how financial influencers generate their income, particularly if they are endorsing specific products. This information may reveal any potential biases or conflicts of interest that could influence the advice they provide.

In conclusion, while social media can be a valuable resource for accessing financial advice, it is vital to exercise caution and discernment when assessing the reliability of financial influencers. By remaining vigilant and considering the red flags and credentials outlined above, individuals can make more informed decisions when seeking financial advice from social media personalities.