4 Reasons Why You Should Not Look for Financial Advice on Social Media

In today’s world, social media has everyone glued to their phones more than ever. It is excellent for staying in touch with your friends, catching up on the latest news, or even making some extra cash. But when it comes to managing your finances or getting financial advice, social media is not the right place you should turn to. The financial advice you find on social media is often generic, and what works for one person might not work for everyone.

If you want financial advice tailored to your exact needs, it is best to consult a qualified financial advisor. This article will help you understand why you should stick to a professional advisor and not let social media impair your finances.

Below are 4 reasons why you should not take financial advice from social media:

1. Influencers are not qualified to offer financial advice

While social media influencers might seem knowledgeable about a wide range of topics, most of them are not qualified to provide financial advice. They might share tips that sound smart or post about trendy investment opportunities, but financial planning requires a lot more research and understanding. A professional financial advisor has to earn various degrees and certifications. On the other hand, influencers usually lack any form of formal training and are not actual experts.

Financial advisors may hold degrees in fields like business administration, law, economics, and finance. They also pursue advanced certifications to specialize in different areas of financial planning. For example, some standard certifications in the U.S. include Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), etc. There are also professionals with certifications like Retirement Income Certified Professional (RICP) or Chartered Retirement Planning Counselor (CRPC), which makes them experts in helping clients plan for retirement. Other certifications include Chartered Trust and Estate Planner (CTEP) and Accredited Estate Planner (AEP), which specializes in estate planning. Financial advisors also hold licenses from regulatory bodies like the Financial Industry Regulatory Authority (FINRA), which ensures they meet strict professional and ethical standards to protect the rights of consumers. Some of these licenses include Series 7, Series 65, or Series 66. It is essential to compare these qualifications to influencers who, in most cases, have little or no formal training in finance.

While some social media influencers may have a basic understanding or an interest in personal finance, they are not qualified to offer tailored advice to your specific situation. Social media content creators typically get their information from other social media pages or internet sources, such as search engines, news articles, online blogs, videos, etc. They simply pick this information and present it as advice. However, what works for one person will not necessarily work for you. The financial advice they offer is often generic and does not consider your unique financial goals, risk tolerance, or long-term needs.

One of the biggest problems with following financial advice from influencers is that they may not fully understand the long-term repercussions of what they are recommending. Since they do not have any professional acumen or experience, they lack focus on the long-term consequences of their financial advice. A qualified financial advisor can help you develop a comprehensive strategy that aligns with your long-term goals, such as saving for retirement, buying a home, preparing for a child’s higher education, or growing your wealth over time. When you rely on influencers for financial advice, you run the risk of making decisions based on incomplete or inaccurate information and potentially leaving your financial goals unfulfilled. Influencers are not bound by the same professional, ethical, and regulatory standards as licensed professionals. They do not have a fiduciary duty to act in your best interest, and many times, their primary goal is to drive engagement for their page and not to provide sound financial advice to their followers. If their recommendations do not pan out, they are also not accountable for the financial consequences you face.

2. Social media does not offer personalized solutions

Social media platforms tend to focus on broad, trendy topics. Most influencers break these down into short reels, posts, or blogs. These posts are often selected based on popular hashtags or what is trending on Google rather than your specific financial needs. While they can be a great way to get an introduction to basic financial concepts, they usually do not provide in-depth information on what you need to make personalized decisions. One of the biggest problems with social media and finance advice is that it often follows a ‘one size fits all’ approach. Social media content creators usually present generalized strategies that may work for some people but are not tailored to everyone’s unique situation. It is important to understand that financial planning is a complex study. Everyone’s goals, risk tolerance, and life circumstances are different and what works for one person could be entirely wrong for someone else. Despite this, social media content creators tend to offer formulas like ‘X + Y = Z’ that oversimplify things.

For example, consider the commonly recommended investment strategy that states you must invest 60% of your capital in stocks and 40% in bonds. Social media influencers might make it seem like this is the ideal portfolio for young investors with a long-term horizon, but that is not always the case. Your personal risk appetite, financial goals, and even market conditions will play a huge role in determining what is best for you. If you are more conservative or have specific short-term goals, that same strategy could actually hinder your financial progress. Social media advice does not take these individual variables into account, and it is more about what works for most people, which may not necessarily suit you. Another issue is that social media content often focuses on engagement. A content creator earns money from social media platforms, which is why getting a high number of likes, comments, saves, and shares may be more important for them rather than providing their followers with suitable advice. Social media platforms also follow designs that focus on short forms of content that can grab viewers’ attention. They typically include an introduction, a brief explanation, and a conclusion. While this format may help you grasp the basics of a concept, it may not be enough to give you a complete picture. Financial planning involves digging deeper into things like tax implications, time horizons, and personal risk tolerance, none of which can be fully addressed in a 30-second to one-minute video, an infographic, or a short blog post.

Most social media content lacks the deeper understanding that comes with personalized financial advice. When you work with a financial advisor, they take the time to get to know your specific situation. They ask you detailed questions about your financial goals, liabilities, income, expenses, age, career prospects, and long-term plans. Based on their findings, they tailor their advice to your unique financial needs. They also make adjustments as your financial situation evolves and allow you to accommodate your changing financial responsibilities and aspirations. Social media simply can’t offer the same level of individual care and attention.

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3. Influencers may simply follow trends

Influencers often go after trends and promote products or services based on their personal financial incentives rather than their actual merit. They aim to capitalize on trending topics in a bid to increase their visibility, engagement, and, ultimately, their income. Many influencers in the financial space may endorse investments or strategies simply because they are profitable for them due to their trending nature, not because they are in the best interest of their followers. In many cases, financial trends are artificially created by companies looking to push their products. These companies might approach a large number of influencers and offer them financial incentives to promote a particular product or service. When a lot of influencers start discussing it, the product or trend gains traction and becomes widely popular among the target audience. As a result, other influencers also jump on board and further amplify its visibility, even if they have little understanding of the underlying risks associated with the product.
Influencers may also have undisclosed financial interests in the products or investments they recommend. When influencers recommend products for specific companies, the advice they offer may not be unbiased. While they may present their recommendations as genuine tips, they could be driven more by the compensation they receive from brands. This can lead to a conflict of interest that can be harmful to followers and also lead to significant losses for followers who are not aware of the financial interests behind the promotion.
Another issue with financial trends is that they can evolve very quickly, and influencers may not always keep pace with these changes. By the time you see a particular trend being promoted on social media, it might already be outdated or even discredited. However, since influencers are more focused on engagement and growth than on keeping up with every financial development, they might continue to promote investments or strategies that are no longer relevant or recommended. Such an environment can create a dangerous herd mentality where many users, seeing a popular influencer endorse a specific investment, might feel compelled to follow the crowd without conducting their own due diligence. When large groups of social media users invest in the same asset based solely on influencer recommendations, it can lead to price distortions. This, in turn, can increase volatility in the market.

4. Social media is full of scams

The effects of social media on personal finance strategies can be seriously detrimental, especially when it comes to scams. One of the main issues when using social media for financial advice is the lack of transparency. Many influencers, who may be struggling financially themselves, might flaunt luxurious lifestyles or claim to have earned wealth by following certain strategies or investing in specific products. However, this can be highly misleading, as their financial situations may not be what they portray. This can create an illusion for their followers, and they may be led to believe that if they adopt the same strategies, they too can become rich. In many cases, these promotions can be outright scams.

Another significant issue is the lack of accountability. Unlike professional financial advisors, who are regulated and held accountable for the advice they give, influencers are not bound by any such standards. Financial advisors, particularly those who are fiduciaries, are legally required to act in their clients’ best interests. They are monitored by regulatory bodies, and if something goes wrong, these professionals can be held responsible. In contrast, influencers are unregulated. There is little to no accountability if they make a bad recommendation or promote a fraudulent scheme. Tracking them down or recovering any money lost from following their advice can be almost impossible. The risk of being misled on social media is high, and if something goes wrong, it is the individual investor’s loss.

This is why it is crucial to seek financial advice from qualified professionals who have the knowledge, expertise, and accountability to help you make informed decisions.

To conclude

Social media for the finance industry can pose many issues. While it may be used to get basic information on products and services, it cannot be used as a comprehensive guide for personal finance. Financial influencers cannot be regulated, and the advice they offer cannot be authenticated. Following their recommendations blindly can lead to potential losses and unfulfilled financial goals. Therefore, it is advised to hire a professional financial advisor to work on your specific goals. This can ensure that the guidance you receive is personalized and dependable and that your unique needs are met.

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