This Is the Riskiest Social Media Platform for Financial Advice
Written by
Martin Dasko
Edited by
Amber Barkley
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According to a comprehensive study of over 2,470 videos on stock investing-related content from Social Capital Markets, 71% of the advice that young adults consume is misleading in some way.
The analysis found that the financial content on TikTok had the most issues, with 91% of the videos failing to include disclaimers and 70% encouraging specific stock purchases. Similarly, a recent Greenlight survey discovered that TikTok was Gen Z’s top social media source for financial education at 59%. Unfortunately, TikTok could be offering them bad financial advice.
Why is TikTok the riskiest platform from which to get financial advice?
Lack of Regulations
“TikTok is a particularly risky platform for financial advice, especially for Gen Z, due to its format and lack of regulatory oversight,” said Tachat Igityan, the founder and CFO of destream.
On a platform like TikTok, anyone can give their thoughts on any topic they desire, even if they’re giving bad advice. With financial advice from professionals, there are often regulations for a reason — investing your life savings into one stock is a significant decision with possible severe consequences.
If you’re getting money advice from TikTok, look for the qualifications of the person offering the financial tips — and if they don’t have the qualifications, cross-check that advice with what experts say before you act on it.
Lack of Professional Qualifications
A lack of regulations means that anyone can post advice in the form of entertaining content. This means that creators on these platforms can make bold promises without worrying about the consequences a financial planner would face for misleading clients.
While the online world has been filled with self-appointed experts for as long as it’s been around, the audience on TikTok is being especially misled.
Igityan said, “Most creators on TikTok lack professional qualifications in finance, meaning advice on complex topics like investments can be misleading or even harmful. Many videos promote high-risk strategies or imply guaranteed returns without proper disclaimers.”
The lack of professional qualifications also means that creators could be sharing strategies with which they were lucky to get results. When taking risks or gambling, one can get lucky occasionally. Just because someone lucked out with a meme coin or a stock pick, it doesn’t mean that they’re a qualified expert who can instruct others.
Quick Advice Over Detailed Financial Discussions
“The platform’s short video style often prioritizes catchy, quick tips that easily go viral, over thorough or nuanced information,” Igityan said. “This format encourages simplified or sensationalized advice, which may omit important details about risks or long-term considerations.”
In reality, boring advice wouldn’t gain much traction on a platform with quick video clips. However, some of the best financial advice isn’t often entertaining, because it involves patience and waiting for results.
Content creators are incentivized to provide sensational tips over practical advice. For example, social media is filled with success stories, but one rarely shares their failures or missteps. A content creator may quickly brag about their stock picks or cryptocurrency purchases that perform well while failing to disclose the investments that didn’t work out.
Jennifer Seitz, the director of education at Greenlight, added, “TikTok’s quick, catchy videos can often simplify sophisticated financial topics, make bold promises about investment vehicles and seem trustworthy.”
You Don’t Get Enough Details About Complex Financial Topics
Seitz encouraged younger people to look beyond trendy advice by researching topics in more depth. She added, “If they see an investing tip or budgeting hack, suggest they fact-check it against credible sources or compare it with other reputable advice. This process not only builds their financial knowledge but also helps them develop a healthy skepticism of advice that seems too good to be true.”
Actual financial growth doesn’t happen overnight, and random tips on TikTok may not match well with your personal goals or level of risk tolerance. That quick 30-second clip may give you a false sense of confidence on a complex topic that requires further knowledge.
Incentives To Sell
Another common issue in this regard is that creators on TikTok may be incentivized through affiliate programs to provide a one-sided perspective about using a platform or a specific tool. This means that you may feel that one investment tool or philosophy is the best way without realizing that numerous other options exist.
There are many content creators on TikTok who are trying to provide legitimate financial education, since they realize that this is the best platform for reaching a younger audience. However, ensure that the advice you consume comes from a qualified individual and makes sense for your situation.
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