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Are you getting financial advice off social media? It happens more often than you might think. About 19.5% of Americans use social media as a source for financial advice, according to a survey by the Consumer Finance Institute at the Federal Reserve Bank of Philadelphia. That figure is nearly doubled among respondents under age 36.
Still, financial advice from social media should be approached with a healthy amount of skepticism. Of those surveyed, 41.4% responded that they don’t trust financial advice promoted on social media.
“Social media can be a great place to get introduced to financial topics, but generally speaking people shouldn’t act upon information before they’ve consulted with a financial professional who can help them apply the financial concept to their specific situation,” says Dave Flegal, a certified public accountant (CPA) and certified financial planner (CFP at Flegal Financial Planning.
Key Takeaways
- Don’t trust financial influencers on social media without checking their qualifications. They may have no financial qualifications.
- Check out the general advice being promoted on social media by reaching out to a local financial professional who can explain how the advice may or may not apply to your specific situation.
- Beware of financial product promotions that urge you to act fast or promise to make you a large amount of money.
Credibility Without Qualifications
People who provide financial advice on social media may not have any professional qualifications. Instead, many finance Influencers try to establish their credibility by showing that they are financially successful or by demonstrating knowledge about a financial topic.
“I’d be skeptical of anyone who claims they’re a ‘financial influencer,'” Flegal advised. “Just because they’re financially successful in one area of life, doesn’t mean the advice they give is appropriate for you.”
Watch out for people selling financial products or services through social media, especially if it sounds too good to be true. Many scammers have used social media to promote pump and dump scams or Ponzi schemes.
Another red flag is the promise of making big money fast. “People fall into traps when they take the bait of making an exorbitant amount of money quickly, effortlessly, and with terms like ‘guaranteed’ or ‘no risk’ thrown into the mix,” says Samantha Mockford, a CFP at Citrine Capital.
Tip
You can easily verify the credentials of a Certified Financial Planner (CFP), Certified Public Accountant (CPA), or Chartered Financial Analyst through their licensing bodies.
Check Credentials
Review the financial credentials of anyone offering financial advice or selling financial products.
“Qualifications matter,” said Noah Damsky, a principal at Marina Wealth Advisors. “Are they experienced and qualified to give advice? Or are they an influencer who’s an entertainer masquerading as a professional? Looking beneath the surface can be a pain, but it’s necessary.”
Before taking financial advice from an influencer, find out if they have any type of financial qualifications. For example, are they a CFP, CPA, or CFA?
“Credentials like CFPand CPA indicate that someone has met high standards for education, experience, and ethics,” Flegal says.
You can verify someone’s CFP credentials by visiting the CFP Board. You can review CPA licenses through your state accountancy board. A roundup of state boards is found on the National Association of State Boards of Accountancy website.
To check the qualifications of a chartered financial analyst, search for their name at the CFA Institute.
The Bottom Line
Think twice about getting financial advice or buying financial products from social media. Many of the people offering them may have no financial qualifications, and they may not have your best interests at heart.
If you do follow social media influencers, dig into their background and find out if they have any financial qualifications. The qualifications for a CFP, CFA, and CPA, can easily be verified online.
