Young and young-ish adults are seeking out the secrets to financial freedom not from their local wealth advisor, but from their smartphone screens. A 2023 Forbes Advisor study found that large numbers of Americans ages 18 to 41 are turning to social media for advice about debt, credit cards, saving, investing and all other personal finance matters, large and small.
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Roughly eight in 10 Gen Zers and millennials have gotten financial advice from social media, with large majorities saying that so-called finfluencers (financial influencers) make them feel empowered and take the stigma out of talking about money — and Gen Xers and boomers are logging on for advice, too.
Social media has democratized the world of financial advice and made it accessible to the masses for free. But the tradeoff for easy access is that any pretender with a Wi-Fi connection can dole out dangerously ill-informed guidance disguised as professional counsel, or even run full-on scams to unsuspecting followers.
Here’s how to spot the dependable and trustworthy finfluencers hiding among the multitudes of unqualified imposters and wannabe gurus looking to separate their followers from their money instead of teaching them how to grow it.
Know the Red Flags
According to the California Department of Financial Protection and Innovation (DFPI), anyone considering taking financial advice from a social media personality should watch out for the following warning signs, and walk away if they see them.
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Pressure and FOMO-based pitches: Beware of anyone rushing you into joining, investing, signing up or taking any other action because you might miss your chance if you don’t act now.
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Unrealistic claims: Be leery of anyone promising a secret or a hack that lets you buy a house for no money, cancel your debts without paying them, instantly raise your credit score, earn double your salary or any other claim that sounds too good to be true.
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An upfront requirement to buy: You shouldn’t have to purchase booklets, training courses, startup materials or anything else got get started. If you do, you can count on being asked to spend more and more and more before the finfluencer can reveal the secret strategy you were promised.
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Free offers: Free offers rarely stay free for long, and often come with hidden fees or are followed by pleas for payments.
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Stick With Experts Who Are Experts When They Log Off
There are two types of financial experts online — the ones who are actually experts, and the ones who declared themselves experts on social media. Here’s why you should put your faith in the former.
According to DFPI and the Financial Industry Regulatory Authority (FINRA), licensed financial and investment advisors are allowed to promote their services and deliver content on social media, but they must adhere to the same strict laws and ethical rules that regulate their behavior when communicating with the public in any forum. That means they must be truthful and disclose conflicts of interest in advertisements and product endorsements. Finfluencers are bound by no such laws.
Licensed professionals must earn and continuously maintain credentials that test and certify their knowledge. Finfluencers do not.
Accredited professionals must follow consumer protection laws that shield the public and their clients from scams and fraud. Finfluencers have no such obligation.
Don’t Take Their Word for It
Anyone can claim a credential, license, degree or professional background. Don’t expect LinkedIn, TikTok or YouTube to vet the personalities who use their platforms.
According to Consumers Credit Union, it’s your responsibility to scrutinize any social media personality you’re considering using as a source for financial advice. That means verifying their credentials, educational background and professional history, as well as fact-checking their claims and suggestions against established, credible third-party sources.
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This article originally appeared on GOBankingRates.com: 3 Ways To Find Trustworthy Financial Advice on Social Media
