Some people aren’t taught about personal finance at home or school and can struggle with investing their money, managing debt, or budgeting their monthly income. That's one reason some turn to social media to learn how to manage their money.
Know the Landscape
As of April 2022, 4.7 billion or 59% of the world’s population were social media users.1 Apart from the usual suspects offering political commentary, humour, and celebrity gossip, the social media landscape also includes a subset of users known as “influencers.” These users have the ability to influence potential buyers of a product or service by promoting the items through their social media. Usually, their sphere of influence increases by the number of followers they have. Influencers make money primarily from partnerships with the brands whose products they promote but there is a growing movement toward full transparency after media reports of influencers being fined and receiving payments that they did not disclose2.
Facebook, Twitter, TikTok, Instagram, YouTube, Snapchat, Reddit, and LinkedIn are all vehicles that contain popular personal finance, investing, and entrepreneurship content shared by influencers.
Oftentimes financial influencers produce educational content that is presented in an entertaining way that gets them noticed on a worldwide platform. In fact, there’s a new term floating around - “finfluencers”– or financial influencers – for those who focus just on financial matters. However, be cautious of the fact that these influencers may not be licensed financial professionals. Free advice, tips and strategies are great ways to dip your feet into learning a bit more about finance. At a minimum, they can help you to know what questions to ask a financial advisor.
What to Watch Out For
When scrolling through social media, remember the rule of thumb “take it with a grain of salt” and proceed with a healthy dose of skepticism. Watch out for get-rich-quick scams and promises that are too good to be true. Cryptocurrencies have boomed (and plummeted) in recent times so they tend to generate a lot of online chatter—but is this an investment that fits with your risk tolerance? Simply put, risk tolerance is the level of risk an investor is willing to take. Risk can mean opportunity, but it is also about tolerating the potential for losses, the ability to withstand market swings and the inability to predict what’s ahead. Online investors need to be aware of the added risk of criminals pretending to be reputable advisors and subsequently stealing personal/banking information.
The Bottom Line
Influencers cast a large net on social media as a means of gaining followers; they don’t know a client’s individual situation and aren’t able to necessarily recommend what fits for them. Also, be wary of not knowing what credentials, if any, that person has; they are not subject to the same regulations and educational requirements as licensed financial professionals. Finally, there is no legal requirement that social media users disclose any conflicts of interest or compensation they may receive for making recommendations.
However, following these financial influencers can be a first step in learning more about managing your finances and managing your money. There's almost certainly a personal finance niche on any platform that can pique your interest. But remember, your circumstances, experiences and situation are likely to be significantly different from the individual to whom the mass-produced financial advice, is oriented toward.
When it comes to trusting someone with your money, your future, and your privacy, CDSPI has been a trusted partner to dentists and the dental community for over 60 years. Our advisors are Certified Financial Planner® professionals with a strong understanding of many of the financial challenges of running a successful dental practice with the expertise that can help you achieve your financial goals.