In today’s digital age, social media platforms like Facebook, YouTube, and TikTok have become popular sources for all types of advice, including financial guidance.
While particularly prominent among younger generations, social media is growing in popularity as a platform for sourcing financial information and guidance across all age groups, making learning about financial topics more engaging and accessible to millions.
According to Deloitte, a quarter (25%) of 18-24-year-olds use social media for financial guidance, and one in five have even made investments based on recommendations found online.
But this approach must come with a warning. Even though there’s certainly benefits to this rise of discussion of personal finance on social media – such as breaking taboos and raising awareness of the importance of financial planning, particularly for retirement – it’s not without its pitfalls.
Misinformation
One of the biggest risks of social media sourced guidance is misinformation. A large portion of financial content shared online is unregulated, meaning it’s not subject to the same checks as professional advice.
In fact, research from Capital One found that half of the videos they analysed offering financial guidance failed to include necessary disclaimers. This lack of regulation can leave viewers vulnerable to potentially inaccurate or misleading information – and when it comes to something as important as your retirement savings, the stakes are too high to rely on unverified advice from online creators.
While online personal finance creators might offer interesting insights or inspiration, they aren’t a substitute for regulated, professional advice. Independent financial advisers undergo training to meet industry standards and have to stay updated on the latest financial regulations and strategies – far beyond what social media creators are required to do.
Lack of tailored advice
Financial guidance from social media can certainly be useful in building foundational knowledge, but it lacks the personal touch that’s crucial for effective retirement planning.
For example, guidance can help you understand the basics of different types of pensions and financial products, but it’s limited to generic information. In other words, it’s difficult to apply this information to your own financial situation.
On the other hand, independent financial advisers offer tailored advice that takes into account your unique financial situation, goals, and risk tolerance. Not only will they break down the fundamental but go beyond this to help you with complex decisions, ensuring your retirement plan is aligned with your personal needs and future aspirations. Importantly, advisers also help manage risk, working with you to develop a strategy that minimises potential financial losses from market volatility or other unexpected life events.
Any trend that encourages people to discuss and engage more in financial planning should be embraced, especially given the current pension engagement crisis we have on our hands. But it’s important to approach these platforms with caution. There is no substitute for professional, independent financial advice when it comes to something as important as securing your retirement. While social media can offer a starting point, personalised advice from a regulated adviser remains the best way to a secure and well-managed retirement plan.