Investing

51% of Gen Z adults have taken money advice from a stranger online — that can be 'problematic,' financial planner warns

"Never take one person's information at face value."

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You'd be hard-pressed to come up with a more loaded phrase these days than "I'm doing my own research." Depending on who you ask, that might mean someone is grappling with important questions by tracking down and meticulously combing through primary sources and academic studies. More often though, it seems, it means that someone is internalizing what people on social media are telling them.

When it comes to their finances, many adult members of Generation Z — those currently aged 18 to 24 — seem happy to do the latter. About 4 in 10 members of that generation say they learned about personal finance from social media sites such as TikTok, YouTube, and Instagram, according to a recent survey from GOBankingRates. And in a survey from CreditKarma, 51% of Gen Z respondents said they'd taken financial advice from someone they didn't know online.

There are plenty of financial professionals with social media accounts full of useful and interesting financial insights. But if you fail to separate the experts from the amateurs or the scammers on "FinTok" and the like, you could be asking for trouble, says Akeiva Ellis, a certified financial planner, financial educator, and ambassador for the CFP Board. She adds, "The top problematic behavior I see is trusting advice blindly on the internet without thinking about the background of the person giving the advice or whether the advice is right for you."

To avoid following advice from a stranger online that could lead you down the wrong path, experts suggest following these three rules.

Verify your sources

The financial advice you're receiving on social media can seem especially compelling if it's accompanied by charts showing dazzling investment returns, or if video shows the person delivering the advice lounging aboard a yacht. But even people whose wealth seems apparent should be vetted, experts say.

"You have no idea how successful someone has been with their trades," Charles Rotblut, vice president of the American Association of Individual Investors, told Grow earlier this year. "It's very easy for them to doctor a brokerage statement and say, 'I made this, I made that.' For all you know, they could be trying to recoup losses by trying to be someone they're not."

To determine if the person dispensing money wisdom is legit, Ellis recommends starting by looking into their financial bona fides. "Do a bit of a background check on the individual giving that advice," she says. "Look into their work and educational experience and see if they have financial credentials. From there, you can do some research. Never take one person's information at face value."

If you're looking for a second opinion, a certified financial planner is likely a good person to ask, says Kevin Clark, a CFP at Ameriprise in Worthington, Ohio. While professional planners will charge you to receive ongoing advice, he says, "younger professionals that tend to be the ones who work with Gen Z — most of those people will not try to bill or charge someone for basic advice or education on the principles of the stock market."

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Set up guardrails for yourself

When it comes to the "noise" surrounding your financial decisions, many old-school investing pros will suggest you tune it out. But to avoid financial media altogether, you'd practically have to be a hermit.

Instead, experts who work with younger clients say that avoiding making impulsive, media-influenced decisions with your money comes down to setting financial limits for yourself.

That starts with having a money plan, says Ellis. "A budget is one of those fundamental tools. The earlier you learn how to manage cash inflows and outflows, the better," she says. "Even if you only have $5 coming in, be sure you made a plan for that $5."

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Having a financial plan based on your goals and values gives you a solid framework through which you can view potential financial decisions, she adds. "Whenever you're presented with an opportunity, ask yourself, 'How does this fit into my unique financial goals?'" she says. "Then, it's having a fundamental understanding of what you're putting your money into and how it fits in with your situation, including your risk tolerance and risk capacity."

Part of that process can be establishing a rule for yourself that keeps you from making snap decisions, says Clark. "Maybe before you buy something, you always wait a day or two before pulling the trigger," he says. "If you come back and still feel like it's something you want to pursue, then you buy, but not with more money than you can afford to lose."

Consider working with a pro

If you're feeling bewildered by the sheer volume of advice available online, it  may give you peace of mind to outsource some or all of the work of financial management to a professional.

The advantage of working with an advisor is that you can craft a plan alongside someone who is aware of your unique financial situation, says Ellis. "This person can make sure that your spending and investing align with your personal goals and values." In other words, you're theoretically not getting advice that's one-size-fits-all, or more troublingly, "buy this investment to get rich like me."

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Financial advisors vary in terms of payment models and services they offer, so it pays to shop around. Some planners may charge you a fee based on a percentage of your investment assets that they manage, while others will charge a flat, annual rate. "An emerging trend among planners who work with younger clients is 'subscription' planning, where the fee is broken down into monthly charges," says Clark. "It's something I've seen Gen Z adopting in particular – it's a manageable cost that fits into the framework of other costs they have on that monthly schedule."

Before you set out to find a planner, Clark suggests making a checklist of your wishes, including pay structure and the aspects of your financial life you want help with. The CFP Board's Let's Make a Plan search engine can help you hone your search on this front.

"Use that list to narrow down your list of candidates," he says. "Go in and talk to two or three people until you find one that matches your personality and feels like someone you're comfortable partnering with."

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