Nearly one-third of American adults (30 percent) who looked for financial advice in 2023 turned to social media, according to Bankrate’s Financial Security Survey. Younger Americans are even more likely than the average to seek out financial advice from social media, potentially setting them off in the wrong direction during their crucial early saving years, when they could get a jump-start on building wealth.
While social media may be a popular way to access low-cost financial advice, it’s a terrible resource for a number of reasons — here’s why.
Why trusting social media for financial advice is a bad idea
Trusting social media can be an awful decision for a variety of reasons.
1. Financial advice often comes from non-experts
Anyone — literally anyone — can claim to be a financial expert on social media and offer advice as they try to attract an audience. Having a presence on social media and declaring yourself a financial expert doesn’t make it so, however.
“Social media is flooded with misinformation,” says Jeff Busch, financial advisor at Elysium Financial in South Jordan, Utah. “So-called experts typically lack education and credentials to give such advice.”
In some worst-case scenarios, so-called advisors may be telling you to do things that are a crime, setting you up for more expense and potentially more significant legal issues.
That’s why it’s vital to check the credentials of any social media personality, and working with a certified financial advisor can help you get good advice.
2. Financial advice may be self-serving
Financial advice from social media is apt to be self-serving, and “finfluencers” may be trying to sell you something that benefits them personally, rather than giving you quality advice.
“Most social media ‘advice’ is designed to hook you on fear or greed,” says Brad Clark, investment advisor representative and founder of Solomon Financial in Carmel, Indiana. “If it is one of those two, then it likely has an underlying reason for being shared. You are going to get sold something based on this fear or greed.”
So social media may try to show how rich you could become if you purchased the finfluencer’s cryptocurrency or if you bought their wealth-building system, which benefits them personally. Of course, they may also be touting legitimate financial products that give them a huge commission.
“If someone truly has a ‘get rich quick’ scheme that works, they would just do that and get rich and stop wasting their time trying to sell others on it,” says Clark.
3. Financial advice may not be tailored to your needs
Even if the financial advice on social media may sometimes be accurate, that doesn’t mean it’s the right advice for you specifically. Your specific financial circumstances are different from someone else’s, and you’ll need advice that fits your needs.
“When it comes to finances, what might work for a person may not work for someone else,” says Clark. “While it could even be good advice for some, it could be terrible advice for others.”
Busch agrees: “Goals, savings, debt, risk tolerance should all be taken into account, and each is different for each person.”
So with social media, you may end up with advice that’s suitable for someone, but not you.
Need an advisor?
Need expert guidance when it comes to managing your investments or planning for retirement?
Bankrate’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.
Where to go for good financial advice
If you’re looking for good financial advice, it’s important to understand who’s providing it.
High-quality websites with credentialed writers and advisors
High-quality websites with credentialed writers or advisors can offer good financial advice. Sites such as Bankrate have experienced and often credentialed writers, including those with the certified financial planner (CFP) designation, who can offer valuable insight into financial issues. Such credentialed advisors can provide accurate financial advice that may work for you.
Despite these positives, many individuals have differing financial situations that may require custom advice. So they need to carefully assess whether they need more customized advice.
Fiduciary financial advisors
A fiduciary financial advisor — one who acts in your interest all the time — is the solution for those looking for the best advice. Your best bet here is to look for a fiduciary advisor who accepts only fee-paying clients. This setup means that you’ll need to pay for financial advice, but this pay structure offers the best opportunity to align the interests of your advisor with your own. If you’re not paying for financial advice, it may be because they’re really salespeople in disguise.
“Financial advisors who are fiduciaries bring a lot of value,” says Clark. “Their goal is to understand the client’s situation and then make recommendations to help them achieve their goals.”
“The key advantage to working with a financial advisor is receiving a customized financial plan,” says Busch. “A personalized plan allows an advisor to understand your personal goals and provide support along the way of your life.”
A well-aligned fiduciary advisor can help you make the financial decisions that make the most sense for your situation, and the best financial advisors can help you build wealth for the long term. Here are four of the most important tips to find a financial advisor who is aligned with you.
Bottom line
Those looking for the best financial advice tailored to their specific situation can turn to a top financial advisor aligned with their needs and steer clear of dubious advice on social media.
“You should exercise caution and take any information you find and consult with your own financial advisor,” says Busch. “It’s the safest way you can build a solid financial plan and avoid costly mistakes.”
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Read the full article here
