How FinTok Is Becoming the Go-to for Gen Z Seeking Sound Financial Advice

Financial advice is no longer confined to traditional avenues. With the rise of TikTok, a new wave of financial influencers or "finfluencers" has emerged, capturing the attention of Gen Z and providing them with financial insights in the most unconventional ways. Financial TikTok, affectionately known as FinTok, has become a formidable force in the realm of financial education. Boasting over 4.7 billion views under the hashtag #FinTok, this community has become one of the go-to sources for financial information, especially among the younger demographic.

Gen Z, in particular, has embraced FinTok, turning to these social media platforms for advice that ranges from loud budgeting to understanding girl math. A recent report by CreditCards.com reveals that Gen Zers are nearly five times more likely to seek financial advice—including stock tips—from social media compared to adults in their 40s or older.

The finfluencer appeal

Within the FinTok ecosystem, finfluencers have emerged as the stars, captivating young investors aged 18 to 25. These influencers offer money-saving and money-making wisdom, creating content that is not only educational but also engaging. The CFA Institute's research indicates that Gen Zers, who often prefer online information to traditional advice, are more likely to engage with finfluencer content on platforms like TikTok, YouTube, and Instagram.

Rhodri Preece, a certified financial advisor and senior head of research at the CFA Institute, acknowledges the evolving role of finfluencers in educating the youth about finance. However, he cautions, "finfluencer content often lacks sufficient disclosures." A mere 20% of content containing investment recommendations on FinTok included any form of disclosure, a potential pitfall for consumers evaluating the objectivity of the information.

Navigating the downsides and upsides of FinTok

While FinTok has proven to be a treasure trove of financial wisdom, there are inherent risks associated with the lack of oversight and disclosures. Preece urges consumers to scrutinize a finfluencer's qualifications and financial motivations. The challenge lies in discerning the intentions and potential conflicts of interest of those providing financial advice online, a task far more challenging than vetting traditional financial advisors.

To address this gap, the CFA Institute recommends consumers verify a finfluencer’s background and potential financial motivations. For certified financial planners, the CFP Board's website offers a reliable resource. Brokers and brokerage firms can be checked on the Financial Industry Regulatory Authority (FINRA) website, and investment advisors can be scrutinized on the U.S. Securities and Exchange Commission’s (SEC) website.

Beyond the potential pitfalls, FinTok serves as a powerful tool for financial empowerment. The unconventional nature of the content doesn't just revolve around investment or tax advice; it extends to tackling challenging financial topics like debt management, compound interest, and long-term goal savings. Michael Hershfield, founder and CEO of Accrue Savings, highlights the transformative power of financial education disseminated through social media platforms like TikTok. He notes, “The average American didn’t learn the basic tools in school or from their parents. That information is power.” For instance, TikTok’s recent trend of loud budgeting encourages consumers to be mindful of overspending, fostering financial education at a time when many Americans find themselves living paycheck to paycheck.

In this era of instant information, FinTok emerges as both a disruptor and an enabler. The playful and humorous tone adopted by finfluencers adds a layer of accessibility to financial education, making complex concepts more digestible for a younger audience. As FinTok continues to shape the financial landscape, consumers must approach it with caution and due diligence. The lack of disclosures in a significant portion of finfluencer content highlights the need for increased oversight. While FinTok offers a unique and engaging platform for financial education, individuals seeking advice must take the initiative to cross-check information and scrutinize the qualifications and motivations of those providing it.