Should you get financial advice from social media?
The GameStop phenomena brought new scrutiny and interest to the role social media platforms can play in generating financial advice. But, before you follow that tip you gleaned from Facebook, Reddit or Twitter, it’s important to be aware of the pros and cons of using the medium for financial information.
When fading US videogame retailer GameStop suddenly became the most traded security in the world thanks to Reddit users, it caused an uproar that left Wall Street shaking. But Reddit is far from the only social media platform that people turn to when looking for financial advice. The Guardian Australiareports that there has been tremendous uptake by Australian users of trading platforms such as Stake (Australia’s version of Robinhood), eToro, and the Commonwealth Bank’s trading platform, CommSec.
Of course, it’s not just stock trading where social media plays a huge role in how people get financial information these days, with self-proclaimed finance gurus proliferating on TikTok, YouTube, Instagram, Discord, Facebook, and Twitter.
The pitch can be anything from the promise of quick, easy money to the Financial Independence, Retire Early (FIRE) movement. #FinTok or #StockTok, as the personal finance segment of the TikTok app has become known, is hugely popular. However, while there is plenty of useful advice being shared – videos on how to budget or get out of credit card debt, for example – there has also been an alarming rise in the sharing of misleading information and financial scams on TikTok.
Things to consider before you act on online financial advice
- Who is this person and what are their financial credentials? It’s all too easy to become a self-styled ‘expert’ online.
- Is this information relevant to you and your specific circumstances?
- Does it sound too good to be true? Get rich quick schemes are typically scams.
- Is this advice credible or simply popular?
In today’s digital world ‘social proof’ is too often taken as evidence of something’s legitimacy, but just because something has gone viral doesn’t mean it’s true or trustworthy. Before you act on any advice, it’s important to make sure it’s coming from a reliable source. People offering specific investment advice online or soliciting for business should be red flags.
Finding a financial advisor
Social media comes into its own as a research tool. Following financial advisors on social platforms can be a great way to get a sense of their personality, beliefs and philosophies, and whether they seem like a good fit for you to work with. If you can find an advisor on social and their information is current, that’s also an indicator that you are getting somebody reputable and up-to-date. I often share videos and other information on my LinkedIn page, and the Facebook pages for Insurance Advisory Service and our new financial coaching business, Money Coach4U.
I also always think that a website with testimonials and a Google presence with positive reviews provides some good reference points. Having a conversation and ensuring that you relate and gel with the advisor is key as well.
Ultimately, the best financial advice is tailored to your life, circumstances and goals. Use social media as a research tool but be sure to get tailored financial advice from a qualified financial advisor before making any major decisions or investing your hard-earned cash.
Callus anytime on (02) 8268 2900 for an obligation-free chat.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.