The internet era and the rise of social media platforms have made sharing information more accessible than ever. Between Facebook, Instagram, Twitter and TikTok, there are more than 3.6 billion people using social media worldwide. This rapid growth has spurred the rise of social media influencers who offer financial tips from their point of view in exchange for followers.
It’s true that you can find some good advice on social media. For example:
- TikTok videos featuring the hashtag #personalfinance were seen more than 3.5 billion times,
- Reddit financial boards have a collective of two million followers, and
- In 2021, TikTok and Instagram are considered the top places for financial advice amongst users.
However, social media also fostered a rise in misinformation and fake news, and the personal finance industry isn’t exempt. Here's what to watch out for when seeking financial advice from social media influencers:
1. Individuals with no personal finance background
People often accept information from social media influencers and assume it to be true without looking into their professional background and verifying their credibility. When considering advice from influencers, you should ask these questions:
- Do they have professional experience that is directly related to the financial advice or information they are giving?
- Do they have relevant certifications?
- What about education?
- If they don’t have a background in personal finance, are they bringing in experts who do to supplement the information?
Unfortunately, many of the viral influencers on social media who share financial information have not undergone any sort of formal financial training.
It would be strange to alter a medical diagnosis after speaking with someone who is not a trained and certified doctor. The same is true for financial advice. Verify information from a social media influencer with other credible sources to ensure accuracy. Working with a CERTIFIED FINANCIAL PLANNER™ professional helps provide legitimacy to the financial information being shared. CFP® professionals are held to rigorous education, training and ethical standards and take time to develop a plan to meet your financial needs.
2. Individuals touting their personal experience with a particular matter as the right advice for everyone
Personal experience does not automatically denote expertise in a particular area. You want to make sure that the information you’re receiving is relevant not only to the social media influencer’s experience but also your specific financial situation. There is often no one “right” answer to every financial decision, so be on alert if the influencer provides only one solution without considering alternatives.
Personal financial planning is personal. When you hire a CFP® professional, you’re hiring someone who is educated and equipped to review your finances and offer personal recommendations and advice. Take, for example, retirement planning. A CFP® professional will review your finances to create a plan to serve your lifestyle and goals. This type of information is personal and simply can’t be distilled in a 60-second social media video to the masses.
3. Implementing one person’s advice without considering the entire picture
Some social media platforms are better suited for brevity rather than long-form content. One downside to this is that social media influencers may not have the option or bandwidth to explain the full context behind a piece of advice or information. One personal financial decision often affects various areas of your financial life. For example, an investment recommendation might have an impact on your taxes. And a debt repayment recommendation might affect your credit.
Ask yourself, “is the financial tip being shared relevant to my financial future?” You need to figure out what works best for your financial wants and needs and leave behind what doesn’t.
4. Just because they’re the loudest doesn’t make them the best
A large social media following doesn’t mean the social media influencer is giving the best information or advice. Keep in mind that for seasoned social media influencers, creating content is their primary business, and they earn money based on their social media reach and their work with advertisers.
So, use your discernment and, when in doubt, consult a financial professional who can help give you targeted advice for your financial situation. It’s also a good idea to check if influencers list any credentials, such as CFP® certification, to demonstrate their expertise.
Financial planning advice is vital in every life stage. As you move through your working years into retirement, you need a customized and specific plan for your financial goals. Take the social media financial tips you view with a grain of salt and let them serve as a helpful starting point in discussions with your financial professionals. Then, when you’re ready to level up from mainstream information on social media, consider working with a CFP® professional to create your unique financial plan. Don’t know where to start? Find your CFP® professional today using the “Find a CFP® professional” tool.