Have you recently come across the latest financial tip or “trade secret” on social media? Perhaps you’ve seen retirement hacks, cryptocurrency offers, or “cutting-edge” investment strategies?
If you use social media, you’ve likely encountered a plethora of financial “expert” chatter. These so-called “finfluencers” are present on nearly every platform, offering shortcuts and making grand promises that often seem too good to be true.
Despite this, many of us buy in without hesitation. More than ever, people are turning to social media to learn about financial matters.1,2
However, this approach is risky. Social media is not the best place to receive balanced financial support and factual advice tailored to your needs.
Continue reading to understand why social media and sound financial planning don’t always mix.
Blindly following what’s popular, often referred to as “herd mentality,” means going along with the masses without critical thinking or conscious decision-making. This type of mob behavior can be particularly prevalent on social media. It becomes even more potent when fueled by “FOMO” (fear of missing out) or reliance on mental shortcuts.3, 4
A notable example of this is the GameStop debacle. In January 2021, GameStop’s stock value skyrocketed, driven by herd mentality largely cultivated on Reddit and facilitated by modern stock trading platforms. The stock’s price surged nearly 20 times, enticing many investors to jump on the bandwagon. However, this frenzy was short-lived. The stock’s value plummeted, resulting in significant losses for numerous individual investors and hedge funds.4
Misinformation on social media is nothing new, but when it comes disguised as “advice” from a wealthy financial influencer, it can be much harder to detect. Sponsored posts from high-profile figures in finance or business can be especially persuasive, prompting many to mimic actions that are often unrealistic or unattainable. Many of us mistakenly interpret high numbers of shares, followers, and likes as indicators of credibility and integrity.5
For instance, a few years ago, a well-known influencer with over 800,000 followers made nearly $190,000 by charging almost $500 per student for a 12-week course on building a travel-blogging business. However, once the course started, frustrations began to surface. Students reported that the content was not as advertised. The influencer responded by blocking those who complained, leaving most students at a loss. It remains unclear if any refunds were issued.6
This example underscores the importance of critically evaluating the sources of financial advice on social media before making any decisions.
Get-rich-quick (GRQ) schemes promise fast, unrealistic returns if you invest, sign up, become a member, or “act now.” These schemes rarely discuss risks and focus solely on rewards, often requiring a significant initial investment or the referral of others to get started.
The reality? Most GRQ schemes are built like a house of cards, deceiving those who join and almost never delivering on their promises of wealth. Instead, participants often end up with substantial financial losses.7
A common example is multi-level marketing (MLM) schemes that proliferate on social media. They offer enticing promises like “Work from home,” “Make $100,000 in your first month,” or “Be your own boss.” However, most participants in these schemes end up losing money. The few who do find success usually have to invest and work tirelessly for years, which is often the same amount of effort and time it would take to launch a legitimate non-MLM business.7
Finfluencers” have one primary incentive: they lie with social media platforms’ algorithms, which reward them for accumulating as many views as possible—not for providing sound, life-changing financial advice.
While social media itself is not inherently bad, “finfluencers” do not pay their bills by serving your best interests. Thoughtful guidance is rarely sensational enough to attract “likes,” but heavily biased, outlandish, and polarizing information often is.
The bottom line? A knowledgeable financial advisor, who will meet with you one-on-one, can provide the tailored guidance that aligns with your unique life story, not a finfluencer on the other side of a screen.
Sources:
Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 24-274
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