In recent years, social media has steadily evolved from a simple communication tool connecting family and friends to a complex ecosystem with diverse potential uses, concerning nearly every aspect of modern-day life.
Young people in particular are increasingly turning to social media platforms for their entertainment and education – and this extends to their financial planning and investment strategies.
Indeed, our recent wealth survey revealed that a quarter (23%) of adults under the age of 34 are already looking to social media for their financial guidance.
The dangers of misinformation
The appeal of seeking financial advice on social media lies in its accessibility and the relatability of its content creators, but it is not without its pitfalls.
Quite apart from increasingly realistic deepfakes and ever-sophisticated phishing attacks, there is also the issue of so-called ‘finfluencers’: content creators who promote financial products, advice and services to their followers.
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Finfluencers are not immune to spreading misinformation – intentionally or otherwise – and some have also been known to encourage high-risk behaviour without properly flagging the associated hazards.
‘Herd mentality’ bias can also prove dangerous, with the infamous GameStop rally in 2021 a prime example of investors’ tendency to follow what others are doing, without doing their own due diligence.
In some cases, individuals simply place too much importance on a single piece of content, without considering other factors at work in the bigger picture. This is a huge risk when absorbing content from finfluencers, but extends to other online resources such as personal finance websites.
Some 41% of 18-34-year-olds and 44% of those over the age of 34 turn to personal finance websites for advice.
While these can be incredibly useful tools in helping people save money and budget responsibly, it’s important to be discerning. Financial planning and investment decisions must reflect your own circumstances, and what may sound suitable for others may not work for you when factoring in all the relevant information such as your age, attitude to risk, investable assets, debts, dependants, and employment status.
With all of this in mind, consumer guides and tips should not be used in isolation when making complex and long-lasting decisions.
Seeking professional advice to complement your own knowledge and research is a safer and more responsible way to identify and achieve your goals. Just as legal or medical concerns call for professional support, the same goes for financial needs.
How comfortable are we discussing money?
When it comes to sharing their personal situation and views with others such as friends and family, people have often put money and finance in the same awkward bracket as religion and politics. However, our research shows that the tide is turning.
Most of our respondents reported being comfortable talking about their finances, most commonly with their children (74%), partner (69%) or friends (60%) – with over a third (36%) willing to raise it with their colleagues.
Younger people are the most comfortable with having money-related conversations, with over two-thirds (69%) of those under the age of 34 happy to engage on the topic with their friends, for instance, compared to around half (51%) of those over the age of 55.
Greater transparency is a promising sign of things to come. By opening up about our finances, we are more likely to feel empowered to take control and seek advice from those qualified to give it to secure our financial future.
Lydia King is head of wealth planning at Handelsbanken Wealth & Asset Management
Related: Regulator outlines rules for the ‘Wild West’ of ‘finfluencers’
