4 Ways To Avoid Bad Financial Advice on Social Media
Written by
Chris Adam
Edited by
Zuri Anderson
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Financial influencers, also known as “finfluencers,” seem to be popping up more and more across most social media platforms. While they claim to offer solid financial advice, putting too much trust in strangers on social media can come with serious risks.
According to some of the more recent information from the Federal Trade Commission, fake investment opportunities on social media can lead to millions of lost dollars. Those opportunities made up around $350 million in reported fraud in just the first part of 2023.
“This is a serious problem because financial influencers are not subject to as much scrutiny or regulation as licensed professionals,” said Marguerita Cheng, a certified divorce financial analyst (CDFA) and an ambassador for the Institute for Divorce Financial Analysts (IDFA).
Here’s a look at four ways to avoid bad financial advice on social media.
Check the Credentials
“To discern between the good and the bad, start by verifying the credentials and expertise of anyone giving advice,” said John Duffy, CDFA and financial planner. “Check if they’re qualified financial professionals rather than just influencers.”
Cheng said to be mindful of the distinction between a financial influencer and a financial expert. You can check for real financial certifications and look on LinkedIn to see if they have actual work experience in finance.
Do More Research
Per Cheng, it’s good to take the time and do research to look at multiple independent sources before making any decisions.
According to Andrew Lokenauth, founder of TheFinanceNewsletter, another piece of advice is to cross-reference with reputable financial websites. Lokenauth also said to look up any unfamiliar terms or concepts and read the comments section for others’ experiences.
Look for Red Flags
Cheng and Lokenauth each emphasized the importance of looking for common red flags. Those can include anyone promising ways to quickly get rich quickly, claims of guaranteed returns, pressure to act quickly and super complicated strategies that don’t make sense.
Use Critical Thinking Skills
Lokenauth said to ask yourself some questions when you see financial advice on social media and are thinking about taking it:
- Can this really work for everyone?
- Does this person have anything to sell?
- Is this advice too simple for a complex topic?
- What’s the worst that could happen if I follow this?
- Why are they sharing this information for free?
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