Personal finance has hit the mainstream. Open TikTok, Instagram, or Twitter and you’re likely to stumble upon tons of posts offering financial advice from influencers. Dubbed by some publications as “finfluencers,” these content creators cover a ton of different personal finance topics, including advice on how to handle student loan debt, how to create a budget, stock and investing tips. And this content is finding an audience, especially among Gen Z and millennials. In fact, a 2021 online survey of 1,000 adults conducted by the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, or TIAA, found that millennials and Gen Z respondents spent the most time per week managing their finances, and also that one third of respondents said they trust social media to help them make financial decisions.
But the quality of financial advice from influencers can be inconsistent, and financial decisions carry more risk than other tips found on social media, like trying a new recipe or hairstyle. This makes it all the more important to vet what you’re seeing online to avoid the potential fallout of acting on bad advice.
“I’m happy that social media has increased access to information for people who might be younger investors or from more marginalized communities, but the downside is that there isn’t really any regulation to accompany that education and that’s where problems occur,” Alleson Tate, CFP, founder and principal of Avere Wealth Management, says. And even if you do see good information, you need to consider it within the context of your entire financial picture.
And the line between general education and encouraging risky behavior can be blurry. In December 2022, the U.S. Securities and Exchange Commission (SEC) charged eight influencers with fraud in a $100 million stock manipulation scheme. The court filing alleges the defendants “engaged in a scheme to ‘pump and dump’ securities based on false and misleading information and material omissions about those securities that the defendants published on social media platforms.”
Be aware that not all the information is sound, applicable to you, or the best move for your finances. “It’s nice to take the information and kind of process it, but it doesn’t mean you have to act on it,” says Judi Leahy, senior wealth advisor for U.S. Consumer Wealth Management at Citi. “Social media is completely saturated with all kinds of information and financial hacks, but there really is no shortcut to it, and what I say to my clients is that might work for somebody but it might not work for you.” For example, you may see a video explaining what a Roth IRA is, or how to create a basic budget outline. Knowing about these options can be helpful, but deciding how much of your paycheck to contribute to a Roth IRA—or whether opening one is the best option for you—based on information from a social media post is risky.
Be especially vigilant about advice about investing and purchasing stocks, which all carry some level of risk. “Particularly when talking about investment recommendations, the implementation of that advice is going to be different for every investor,” Tate says. “[Investing principles like] risk tolerance, time horizon, and investment objectives are all missing from the conversation because you can’t discuss all of that in a 60 second video.”
Finance advice red flags
There are some general red flags to watch for when assessing financial advice from influencers, the experts say. Be wary of anything that seems like a get rich quick scheme or that promotes risky behaviors, Leahy says; she cites advice like not paying off your credit card as risky, which could tank your credit score and cause long term issues. Specific stock and investing recommendations are also red flags. Keep in mind that because personal finance is just that—personal—anecdotes about what worked for someone may not be the best fit for you. And don’t trust something just because it went viral. Engagement numbers, like views and follower counts, aren’t a measure of reliability and skill. “Finance is not pop culture,” Leahy says.
How to vet financial advice, including sources and qualifications
One of the toughest aspects of consuming advice online is figuring out what the qualifications are of the people doling out tips. There are certain certifications that professionals can hold to designate that they’re qualified to give financial advice and regulated by federal agencies.
“Anyone can call themselves a financial planner or expert, so that’s really spawned the rise of the Certified Financial Planner, or CFP, [certification], which means that person is legit and is being regulated by an agency,” says Travis Sholin, CFP, a financial advisor at Keystone Financial and adjunct professor of finance at the University of Nebraska in Omaha. “So many people are trying to call themselves experts so we have to have a way to set ourselves apart.”
Licensed professionals are regulated by the SEC, the Financial Industry Regulatory Authority (FINRA), or both, he says, and may hold several certifications. “It just depends on how they’re licensed and how the business and their organization is set up.” CFPs create plans that take into account a person’s whole financial picture, while financial advisors focus specifically on stocks and investments.
“Finance is not pop culture.”—Judi Leahy, Senior Wealth Advisor for U.S. Consumer Wealth Management at Citi
The four most common certifications are the series six, seven, 65 and 66 licenses, which mean the professional has passed the appropriate exams and has agreed to follow consumer protection laws—and be penalized if they don’t. “To be able to sell a mutual fund, you have to have a series six or seven, and to sell an individual stock or exchange-traded fund (ETF), you have to have a series 65 or 66,” he explains. He points out that people who don’t hold these licenses aren’t held to these standards. “You don’t see a lot of licensed people posting because everything has to be monitored,” he adds.
They also have to disclose conflicts of interest. (In October, the SEC fined Kim Kardashian $1.26 million for failing to disclose that a crypto company paid her $250,000 to post about their tokens.) Some social media platforms, including Instagram and TikTok, require people who post to mark if a post contains sponsored content; TikTok’s advertising policy has guidelines about financial videos.
How to get good financial advice
According to the experts interviewed, sound and personalized financial advice doesn’t have to be out of reach, and there is some good information available on social media. They say many certified financial planners and advisors don’t only work with wealthy clients, and are a good check to confirm any financial advice from influencers you’ve seen on social media. Some firms don’t charge minimums and offer free consultations, and other advisors will work with clients on a limited or subscription basis, Tate and Sholin say. Your bank might offer some free or low-cost services, too.
Financial advisors, certified financial planners, and Accredited Asset Management Specialists (AAMS), another type of accredited financial professional, all use clients’ specific interests to tailor plans to them. Dana Palma, CEPA and AAMS, a financial advisor at Edward Jones and board member of the Association of African-American Financial Advisors, says qualified professionals take into account a client’s personal goals, interests and comfort with risk. She recommends searching for advisors on reputable firms’ websites and through organizations that focus on individuals with specific credentials.
There are also some helpful online tools to research investments and to vet the qualifications of people giving financial advice. The Financial Industry Regulatory Authority (FINRA) provides a tool called BrokerCheck where consumers can see if a financial professional is registered, holds licenses and has disclosures or settlements. “I’d be wary if the person who was touting information or a stock idea was not a registered person or unaffiliated,” Leahy says.
Federal and state government websites offer education tools, too. In a video posted to the SEC’s Twitter account, SEC chairperson Gary Gensler warned consumers not to turn to celebrities, influencers, and entertainers for investment advice. He encouraged consumers to use the agency’s database, EDGAR, to search a company’s finances and latest filings before making investments. The federal government also provides resources for investors online, and individual states may provide their own resources. For example, California’s Department of Financial Protection and Innovation has tools for investors, too.