As the digital age reshapes some traditional norms, a dramatic shift in the sources of financial advice is emerging among investors.
Betterment, an online investment company, recently surveyed 1,200 investors from Gen Z to baby boomers about their preferred sources of financial information. The study revealed a startling trend: more than half of Gen Z and millennial investors are receiving financial advice from social media.
Simultaneously, the survey found that financial advisors are the most trusted source of advice, with 67 percent of respondents ranking them in the top three. Meanwhile, social media influencers lagged, with only 22 percent ranking them within their top three.
This intriguing data prompts a deeper exploration into the risks and rewards of sourcing financial advice from social media influencers versus licensed financial advisors.
Social Media: New Face of Advice?
Social media influencers, with their enormous online presence, have emerged as a significant source of financial advice for investors. Influencers often share personal anecdotes and strategies that have worked for them, or promote certain financial products, offering sometimes a very relatable and accessible source of financial advice.
However, despite their appeal, there are noteworthy potential risks associated with relying solely on influencers for financial counsel:
Financial Advisors on the other hand are required to:
What are the benefits of using a Financial Advisor?
Just a couple, or even one significant bad financial decision can have major implications, potentially damaging your financial well-being. The onus remains on investors to discern between advice that is based on trying to promote clicks, selling financial products, hearing half-truths, or get rich quick schemes, vs. advice that is personalized, grounded in sound financial strategies that comes from a trained, and regulated fiduciary advisor.
-Paul R. Rossi, CFA
Note: While I freely admit that I might be biased as I run a financial advisory firm, it doesn't change my core belief that working with a professional advisor is typically more prudent than taking advice from a social media influencer.