A new survey on where Americans get their financial advice finds a significant percentage of the Gen Z group are relying on social media, InvestmentNews reports.
Gallup conducted a poll last month of 2,036 U.S. adults, in which respondents were asked whether they use each of 10 financial information and advice sources.
It found that 42% of American adults ages 18 to 29 are getting financial advice from social media, compared to 27% who use financial advisors and planners for guidance. Older Americans are more likely to turn to financial professionals, who are used by 40% of those ages 30-49, 45% for ages 50-64, and 51% for those 65 and older.
The reliance on social media for financial advice raises concerns about the impact of “Finfluencers”, influencers who primarily use social media to promote advice about finances and investing, popularized on Instagram, Reddit and TikTok. A report last year by the World Economic Forum said Finfluencers’ use of social media is helping to drive the democratization of financial information by providing new tools for financial advice among Gen Z and millennials, who are entering the financial markets at an earlier age than previous generations.
“The percentage of young adults using social media for financial advice is stunning and truly concerning. There is so much misinformation being shared by finfluencers, and sadly this young demographic trusts what they hear,” Bridget Venus Grimes, president of the independent RIA WealthChoice, told InvestmentNews. “The challenge I see is that people are drawn to hot tips, easy money, emotional investing. This is what seems to draw more viewers and build larger audiences.”
The Gallup poll found a correlation between income levels and the use of social media for financial advice. 24% of adults making less than $48,000 used social media, compared to 20% of adults making between $48,000 and $90,000, and 18% of upper income earners above $90,000.
“One of the popular Instagram finfluencers, I cannot tell you how many times she references a recession,” said Grimes, a CFP Board ambassador. “This buzz word gets viewers. It frightens folks who don’t know what they are reading, but who have chosen to trust someone who comes across with confidence. The disconnect is that people are making financial decisions based on what loud, frequent posts share.”
The survey found that when seeking financial advice, U.S. adults are more likely to turn to friends and family (43%) or financial advisers and planners (41%) than any other type of resource. The next-most-popular sources are financial websites (36%) and financial institutions such as banks and credit unions (32%).
“Friends and family may offer real life stories that can be relatable, but another risk is that they may be speaking from their own biases, money scripts, personal agendas, and experiences,” said Jesse Giordano, a financial advisor for Opal Wealth Advisors. “Or their information may be old and no longer relevant to today’s opportunities or your life stage.”
The Gallup survey concludes, “U.S. adults have a wide range of choices at their disposal for getting financial information and advice. These run the gamut from professional advisers to self-guided learning through websites, books and media. Young adults are most likely to turn to friends and family, while seniors prefer financial advisers and planners. In both cases, the top source reflects a personal relationship, highlighting the importance of the human connection in financial decision-making.”
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