As the investing world becomes more dynamic and unpredictable, it’s natural for investors to look for new sources of information that can provide guidance or insights. One of the most popular trends is to turn to social media platforms for tips or strategies on making the smartest decisions. But how reliable is online financial advice, and what are the risks of trusting it to tell you what to do with your money?
Recent research shows that several young investors have made financial decisions based on misleading information sourced online. This trend raises concerns about the reliability of online financial platforms and the potential repercussions for young investors.
The study, Nationwide’s ninth annual Advisor Authority survey, conducted by the Nationwide Retirement Institute discovered that over a third of young investors acted upon financial advice they found online, which was later determined to be misleading or incorrect.
Consulting the internet for efficient and accessible information is second nature to younger investors, who are unfortunately experiencing the pitfalls of unverified financial advice in real time. 34% of non-retired investors aged 18-54 have encountered, then acted upon financial information seen online or on social media that turned out to be misleading or factually incorrect, including more than two in five (41%) Gen Z and 34% of Millennial investors.
“Social media is a powerful tool and a great resource for learning about different financial topics, but it comes with plenty of misinformation as well,” said Rona Guymon, Senior Vice President of Nationwide Annuity Distribution. “Online information can be inaccurate, or not applicable to your situation. That’s why it’s important to scrutinize the financial information you find online – or better yet, turn to an advisor for help.”
Younger investors, whose upbringing has coincided with the rise in online information (and misinformation), are navigating the financial advice they find on the internet differently than older investors.
More than 42% of Gen Z investors and 38% of Millennial investors are accessing financial information, guidance, and advice through social media, by far the most of any generation (vs 16% of Gen X and 5% of Baby Boomers). Millennials (21%) and Gen Z (17%) are also the age groups most likely to turn to generative AI for financial information and guidance, compared to 7% of Gen X and 2% of Baby Boomer investors.
By contrast, older investors appear to be more cautious about online financial information, making them less likely to fall victim to misleading advice: just 6% of Baby Boomer investors have acted on misleading or factually incorrect financial information seen online or on social media the least of any generational cohort.
To ensure their clients do not fall victim to financial misinformation found online, advisors are leaning into educational and preventative measures to emphasize the importance of verified, reputable financial advice.
60% of financial advisors are providing guidance to their clients on a case-by-case basis when they are approached with questions about a specific situation, and nearly the same amount 58% are educating their clients on the potential risks of misinformation found on social media and generated by AI. In addition, 47% are encouraging their clients to stick to their long-term financial plans to avoid hasty decisions.
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