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Advisors, be honest. In the back of your minds, you knew this to be case: Gen Z and millennial clients and prospects rely heavily on social media for financial advice.
Regardless of forum, not all financial is good, but on social media, the bad outweighs the good, often by a sizable margin. TikTok is one of the primary forums through which younger investors gain advice and while there may be some good accounts on there (there probably are), TikTok isn’t a great avenue for financial advice – be it investing, personal finance, etc. – for multiple reasons.
First, most of the videos on TikTok are relatively short – less than two or three minutes. That implies an influencer could well be attempting to breakdown a complex of esoteric concept in rapid fire fashion, potentially leaving out important details along the way. Second, a TikTok hallmark, one made possible by video, is for the influencer to purport a lavish lifestyle that may not be reality. Think “Hey, look at my Ferrari I got from trading penny stocks” or “I sold everything to become an Airbnb ‘boss’ and all my income is passive.”
While Gen Z and millennials sure do love TikTok, they’re may be wise to change their affinity for it as a source of financial advice. A study by WallStreetZen indicates that 63% of TikToks related to stocks contain potentially misleading information and 95% make no mention of risk. Those data points are telling and make the findings of a more recent survey all the more important.
Good and Bad News About Social Media and Financial Advice
There’s no denying that there are some dubious financial claims being made daily on various, but advisors can take heart because not all younger clients are being “brainwashed.”
Let’s start with some of the upside that comes from obtaining financial “wisdom” via social media. A recent poll by Forbes Advisor indicates 76% of Gen Zers questioned found social media made it less taboo to discuss finances and 62% said they derived empowerment from financial advice found on social media.
Sort of good news: TikTok isn’t the top social media forum through which younger clients get financial advice. Thirty-two percent said it’s tops for them, but that’s behind the 47% that said the same thing of Reddit and YouTube, according to Forbes Advisor. Remember, it was a Reddit forum that birthed the GameStop frenzy. Make of that what you will.
It might be a stretch to call it “bad news,” but the Forbes survey noted that X (formerly Twitter) ranks fifth among social media outlets as a source of financial advice for Gen Z and millennials. That’s a shame because, at least when it comes to investing, there are some excellent, credible accounts to follow there.
How Advisors Can Help
Advisors should avoid the big pitfall when it comes to discussing social media with young clients: don’t tell them to get off those forums. An advisor isn’t a parent and such admonishment will not work.
Where advisors can find some room with which to work with Gen Z and millenials on the intersection of financial advice and social media is by highlighting to those clients that influencers and other faux experts often extol one-size-fits-all approaches – many of which aren’t applicable or relevant to the client’s individual circumstances.
Likewise, advisors should encourage clients of all ages that are social media-enthused to do some vetting of the financial accounts they follow because data confirm that’s not taking place.
“In the survey, just 31% of millennials and Gen Zers regularly check the experience and qualifications of people who supply financial advice on social media,” concludes Forbes Advisor.
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