Seeking Financial Advice From Influencers? Here are Red Flags to Watch out for

Social media dominates the consumption of information in the digital age and the way it is used in the real world. Among influencers talking about everything from fashion to beauty to diet and healthcare, there are also those who provide investment insights as well as know-how on savings and personal finance. A recent poll conducted by Generation Lab and Morning Brew revealed that nearly 20% of college students turn to social media for financial guidance, and TikTok in particular, has become a hub for financial advice with 34% of Generation Z relying on the platform. While social media can be a valuable source of financial knowledge, it has also become a breeding ground for scams orchestrated through finfluencers doling out dubious advice and misinformation. To stay vigilant in such an environment, these three key signs can help netizens steer clear of shady influencers.

If it sounds too good to be true, it probably is

The allure of quick and big returns can be tempting, but if an influencer's advice seems too good to be true, it could be a red flag. Get-rich-quick schemes or overnight success stories rarely align with reputable personal finance strategies. Quick fixes in personal finance often involve more risk than reward, and in the world of financial planning, patience, and careful consideration are virtues.

Beware of extremes and absolutes

Financial influencers who adopt extreme stances or speak in absolutes, especially when it comes to handling debt, should be approached with caution. A one-size-fits-all approach to managing debt must be avoided since all debt is not the same. While some influencers may advocate paying off all non-mortgage debt before building an emergency fund or investing, a nuanced approach is recommended.

Never trust one solution for every problem

Financial influencers offering a single solution for every financial woe may lack the nuance required for effective financial planning. A uniform fix for diverse financial issues, such as promoting life insurance as a panacea for various financial goals, is unlikely to be sound advice. Personal finance is inherently multifaceted, and a one-size-fits-all solution may not address the unique circumstances of each individual. Vigilance is necessary when influencers present a singular solution as the answer to all financial challenges.

Credentials matter: How to vet financial influencers

To discern credible financial advice from influencers, first check their credentials. Financial professionals are likely to showcase their certifications, such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA), in their profiles. Being regulated by organizations and regulatory agencies adds a level of accountability and ensures that influencers adhere to industry standards. Look up a financial professional's track record on platforms like BrokerCheck to assess their past performance and potential red flags.

But credentials alone might not tell the whole story, making it essential to investigate an influencer's background, to uncover any notable complaints or concerns. Understanding how the influencer generates income is crucial. If their revenue is tied to selling specific products, there might be a bias in their recommendations.