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April is Financial Literacy Month meaning now is an excellent time for advisors that work with younger clients to have the social media conversation.
It’s not “the talk” parents have with kids, but in advisors’ minds, it might be close. After all, there’s no denying that the younger clients are, the more likely they are to be relying on social media for financial advice. That’s particularly true among Gen Z clients and investors.
A new survey by Spruce, the mobile banking arm of H&R Block, underscores the extent to which Gen Zers have been influenced by financial content on social media. Sixty-eight percent of Gen Zers polled by Spruce admit to being wooed by financial topics seen on social media. Not surprisingly, with age comes wisdom as that percentage drops to 51% for millennials and 27% for Gen X.
Something else advisors should note is that, according to Spruce, 37% of those polled admit they’ve participated in a financial trend they discovered on social media – some of which are rather dubious and many of which aren’t credible financial advice.
Considering Sources
It’s not on advisors to play the roles of judge and jury regarding client social media consumption trends, but it’s worth knowing from where younger folks are getting information.
“Among the platforms driving this shift, TikTok (39%) and Instagram (34%) are the most popular sources of financial information for Gen Z, followed by Facebook (23%) and even podcasts (17%). These findings highlight the growing impact of digital content on personal finance decisions, particularly among younger generations,” notes Spruce.
Advisors should also be aware of Reddit, which is also popular among young investors. For the purposes of this article, I briefly perused the ETF sub-Reddit, discovering that the most prominent “advice” there is essentially “VOO and chill” – a reference to the Vanguard S&P 500 ETF (NYSE: VOO). In just a few minutes on there, I also discovered that participants appear loathe to consider anything other than 10 ETFs at the most. That’s 10 out of a universe 3,900.
There’s also an entire sub-Reddit dedicated to a dividend ETF, which will remain nameless, that while cheap, has a propensity for lagging its peers, often by large margins. The existence of this sub-Reddit isn’t an issue, but its 14,000-plus members is an issue – one highlighting the point that even young investors are vulnerable to herd mentality.
Empowerment Matters
One thing advisors can do for younger clients is empower them to seek out validity over “edutainment” when it comes to digital financial advice or even start the process of reducing dependence on social media as their primary source of financial advice and education.
It’s process worth considering because, perhaps surprisingly, even young investors don’t feel too confident in their ability to make sound decisions without the help of digital forums.
“From our findings, 66% of Gen Z share that they are not confident or only somewhat confident in making large decisions without digital assistance. These findings highlight the increasing role of technology in empowering individuals across all generations to manage their finances with greater confidence and ease,” concludes Spruce.
The silver lining there is that as they age, Gen Zers are likely to see increasing value in the human touch offered by advisors.
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