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Data confirms that people are spending more and more time online. So much so that hours spent on the internet are now in excess of those devoted to watching television.
There are benefits and drawbacks to folks spending more time online and some of those pros are arguably cons, too. For many clients, the internet is increasingly their primary source of news and financial research, be it personal finance or investing tips. While the word “misinformation” is perhaps overused these days, there is plenty of it on the internet.
Making matters worse, some of that misinformation comes courtesy of those that are positioned as experts and those that are tempting viewers with delusions of grandeur. Think about it this way: Do you want clients getting investment advice from a 30-year-old on TikTok that claims to have 700 investment properties or the IRA withdrawal advice from a debt-reduction guru? Probably not.
Point is advisors should have conversations with clients about the types of financial content they’re consuming online, particularly via social media.
Good Time to Have the Chat
To be sure, there are some excellent sources, some of which are free, of investing and personal advice online. However, those are significantly outnumbered by dubious sources and clients often act upon advice from the latter.
“One of the key findings in the powered by the Nationwide Retirement Institute®, found that many retired and non-retired investors have come across bad financial information online and have unfortunately acted on it. In some cases, this financial misinformation can potentially set investors back from realizing their long-term financial goals,” according to Nationwide.
Compounding the woes of getting bad financial advice is what leads people to that vulnerability in the first place. They’re worried about issues such as salary, inflation, healthcare costs and more. Understandably, people get emotional about those and other financial topics and bad actors exploit those vulnerabilities.
“The demand for financial information comes at a time when many people are feeling increasingly stressed about their personal finances,” adds Nationwide. “Financial planning struggles can come from different sources—debt overload, lack of savings, and high taxes, for example. Being prepared for retirement is one of the more common concerns.”
There’s a silver lining there: Combine those sources of angst with the inquisitive nature of human beings and it’s clear that there’s demand AND need for financial advisors.
Younger Clients Most Vulnerable
Given the time they spend on social media and their penchant for risk-taking, Gen Z and millennials are the demographics most susceptible to faulty financial advice.
“Generally, it’s investors from younger generations who are more inclined to seek out financial information on these social platforms,” notes Nationwide. “That’s not surprising given that many Millennial and Gen Z investors grew up online. Our survey confirmed this trend; nearly two-fifths of Gen Z (42%) and 38% of Millennial investors have turned to social media for financial guidance, with usage dropping significantly among older generations.”
Bottom line: Advisors should discuss with clients where they’re consuming financial information online. A brief chat to this effect could payoff in the form of long-term, tangible benefits.