File Image: Freepik
File Image: Freepik

The dangers of relying on social media for financial advice

By Staff Reporter Time of article published Aug 30, 2021

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By Dominique Bowen

In July this year, TikTok was downloaded 63 million times globally, according to app intelligence and data company Sensor Tower. The app has close to 700 million monthly active users, spending roughly 52 minutes a day scrolling through the never-ending stream of content churned out by the platform’s algorithm. This doesn’t sound like much compared to the hours some spend on Twitter, Instagram, Facebook or YouTube, but considering that up until recently TikTok videos were capped at a minute long, that’s a lot of quick, punchy content browsed throughout any given day.

The app is primarily designed to entertain, but a space is being etched out for advice-themed content, which is pretty innocuous for interests such as cooking, outfit styling, and job interview tips. Where the lines become blurred is content purporting to offer sound financial advice. It’s easy to fall prey to it on platforms like TikTok or YouTube Shorts, where it’s packaged in a highly engaging, snackable way. Why listen to a suit for 30 minutes when you can get the highlights reel in a short one-minute burst, right? Well, the reasons are plentiful.

Unlicensed to advise

Whether you come across a great idea or interesting investment insight on Facebook, TikTok, Instagram, or even around the braai, scrutinise the source. If someone on TikTok without any formal training is plugging the unprecedented benefits of investing in cryptocurrency, for example, it’s not an excuse to eschew a conversation with a qualified financial expert about an investment strategy that works for you.

In her own practice, Certified Financial Planner and owner of InSync Financial Services, Sonja Linde, has seen this movie before. “I recently had a client who bought some Bitcoin based on information provided by a friend. Unfortunately the client has lost close to R100 000,” she says.

With the proliferation of TikTok, anyone can be a content creator. Anyone can make an advice video about any topic. Taking advice from a social media personality is as good as following the recommendation of a friend. Just as there’s little regulation on older platforms such as Facebook, Twitter and Instagram, TikTok’s content is not vetted for sound advice. “Users give opinions on areas of finance from their own experiences, but remember that just because they have the product or service in their own portfolio does not make them an expert on the topic,” says Linde.

Tread carefully online

Many qualified financial planners do use their social media presence to post conversation starters with the intent to educate their clients and, where applicable, initiate a conversation about their financial needs. It’s important to distinguish between these conversations and advice being posted outright for followers to take on board, because a responsible financial planner would not advise on major financial decisions to the masses.

“Very often a person posting a question on social media for a financial planner to help answer only provides limited information, and it is therefore very important to follow up that question with a consultation, to make sure all facts have been taken into account before following any advice,” Linde says. The right way to go about engaging with this content is to note down the thought and raise it when you have your next meeting with your financial planner.

The online popularity contest

There is entertainment and educational value in a lot of the content posted on TikTok and the rest of the social media cohort, but always keep in the back of your mind that, whether for followers or friends, users are often chasing reach and subscriptions. If that means posting short and snappy yet questionable tips, or clickbait proffering the age-old get-rich-quick promise … well, some have fewer scruples than others. Nothing you find online will match the value of finding a qualified financial planner and building a relationship with them that meets your financial needs.

“By building a long-term two-way relationship with your financial planner, you can ensure that they really understand your lifestyle choices and family responsibilities,” says Linde. “They can then provide recommendations that are relevant to you and your unique circumstances throughout your life, with all of its changes. I believe that you need to connect with your financial planner, and that they should put your needs first.”

Winning formula for women

Being financially independent as a woman can come with the pressure to naturally have it all figured out when it comes to your financial planning. Traditionally, women have seldom sought the help of a financial planner, and it’s time to change this narrative.

“It is very important these days for women to take control of their own finances, especially making sure their families are taken care of in the event of their death, and also ensuring they have a financially secure retirement plan in place,” says Linde.

You will much sooner see the rewards of taking that financial control when you choose to follow qualified, tailored advice – not just another social media handle.

PERSONAL FINANCE

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