Why curious Gen Zers should be wary of online financial advice
Gen Zs: A 2023 survey by advice-as-service platform Anni, with Antenna, an independent consumer research agency, found almost one in four have had a bad outcome based on advice from social media.
They're young and the most stressed about money, but it's not all doom and gloom for Gen Zs wanting to get savvy with their finances, as long as they don't put too much trust in social media.
A report from the Australian Securities and Investment Commission (ASIC) late last year revealed 82 per cent of Australians aged 18 to 26 years old feel financially stressed. However, they're also twice as likely to want to improve their finances when compared with other generations.
Social media is their go-to source for financial information (56 per cent compared with 23 percent of non-Gen Z), with their top sources including YouTube (33 per cent), TikTok (23 per cent), Instagram (19 percent), Facebook (15 per cent) and X/Twitter (5 per cent).
However, advice from social media influencers isn't all it's cracked up to be. A 2023 survey by advice-as-service platform Anni, with Antenna, an independent consumer research agency, found almost one in four have had a bad outcome based on advice from social media.
Almost half of the 1024 Gen Zs surveyed said that "no cost" and "ease of finding" are the key reasons they use social media for advice.
Associate Professor of Finance Angel Zhong from RMIT said Gen Z tends to gravitate towards social media due to its integral role in fostering connectivity, self-expression and instant access to a range of information and trends.
"The interactive and visual nature of social media platforms aligns with Gen Z's preferences for quick, visual communication and the desire to stay socially engaged with peers and global communities,' " she said.
Zhong said that taking financial advice from social media such as TikTok without due diligence can lead to uninformed decisions.
"Additionally, financial advice from social media may not be correct. Personal finance is nuanced and a one-size-fits-all approach may not work for everyone. Finfluencers [financial influencers] are successful because they fill in a gap in the market."
Often this is due to being able to explain complicated finance concepts in engaging ways.
"On top of this, most do it for free, unlike financial advisers," Zhong says.
"The big downside of taking free advice is that finfluencers might not be licensed to provide advice that's in the best interest, or worse, not know what they're talking about."
Zhong says it's a cause for concern if a finfluencer who is not a financial adviser is doing any of the following:
Giving specific recommendations of a product or stock.
Linking out to specific products or stocks.
Saying something will give you a guaranteed return.
The big downside of taking free advice is that finfluencers might not be licensed to provide advice that's in your best interest.
Associate Professor of Finance Angel Zhong
Financial watchdog ASIC has warned influencers on the laws regarding misleading or deceptive conduct, including the fact that they don't need to be licensed to breach these provisions.
Subsequently, ASIC has taken legal action against at least two finfluencers.
While there is some protection for Australians under ASIC, Zhong adds, the pervasive reach of social media means that Australians can be influenced worldwide.
"We need regulators to strengthen international collaboration and share information in an effort to address cross-border issues arising from social media influences on financial decisions," she says.
This appeared in Sydney Morning Herald, The Age, Brisbane Times and WAtoday on April 3rd, 2024.
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