In our digital age, online platforms and social media sites offer an abundance of financial advice. However, the ease of internet access also paves the way for the spread of financial misinformation. From untrained family members to self-proclaimed online finance gurus and AI-powered resources, inaccurate financial counsel can have detrimental effects, potentially leading to monetary loss. A new survey done by the Nationwide Retirement Institute® found that a significant number of investors encountered inaccurate financial information online and then later acted on it. In certain instances, this inaccurate financial information could potentially hinder these investors from achieving their long-term financial objectives.
We will explore the dangers of financial misinformation and provide tips on how to spot inaccurate advice and why it is important to work with a financial professional.
Identifying Unreliable Investment Tips
Being aware of financial misinformation starts with recognizing the characteristics of untrustworthy advice. Approach any guarantees of immediate profits or investment strategies that seem overly favorable with skepticism. Non-professional sources often exaggerate potential results or display unwarranted confidence in their skills. Additionally, be cautious of advice lacking specifics, as everyone’s financial situation and goals are unique.
Additionally, consider the context in which the investment tips are given. Consider the current market conditions, economic trends, and risk factors associated with the proposed investment strategy. A financial professional will consider your risk tolerance, investment timeline, and financial goals when providing recommendations. Rather than making impulse decisions, our survey found that 47% of financial professionals are encouraging their clients to stick to their long-term financial plans. Making moves based on market volatility or headlines in the news can tend to lead to costly mistakes.
The Role of Different Platforms in Spreading Financial Misinformation
The internet, particularly social media platforms, can fuel financial misinformation. Unregulated platforms can circulate incorrect information, disguising anecdotes as fact. However, misinformation is not confined to anonymous online users. Friends and family can unknowingly share inaccurate financial advice. Just because someone you trust says something about your finances, does not mean they are the right person to advise you or understand your complete financial picture.
Recently, Generative AI has emerged as a concern for providing inaccurate information. Even popular social media platforms where influencers hold considerable sway over their followers, have become hotspots for questionable financial advice, with the potential to rapidly mislead many people. Our recent Advisor Authority survey found that 42% of Gen-Z and 38% of millennial investors have already turned to social media for financial guidance.
Financial information discovered on social media and produced by AI is not always flawed. Indeed, a significant amount of beneficial financial advice can be found on the internet, making things easier than ever for consumers. However, it’s important to be mindful of encountering financial misinformation when seeking advice online.
Tip #1: Embrace Financial Tools:
Utilize financial calculators or budgeting applications to manage your finances effectively. Such tools can assist with budget planning, spending tracking, and informed financial decision-making.
The Dangers of Acting on False Financial Advice
34% of non-retired investors aged 18-54 in our Advisor Authority survey have encountered and then acted upon financial information they found online that they later discovered was misleading or factually incorrect. The impact of following false financial advice can vary from minimal monetary setbacks to substantial financial losses. In the most extreme situations, relying on inaccurate advice can cause lasting harm to your financial well-being and long-term goals.
Tip #2: Fact-check information and look for detailed advice:
Always verify the authenticity of online financial information. Reputable finance platforms, esteemed finance experts, and certified financial professionals are reliable sources.Sound financial advice is typically detailed and customized to your financial situation. Be careful of general advice that lacks actionable steps.
Tip #3: Knowledge is power:
A financial professional can help enhance your financial education and knowledge. They can provide valuable insights and offer tailored recommendations to your interests. You can also follow financial news, articles, and trusted finance blogs to stay updated on the latest developments.
Don’t let the rampant misinformation in today’s information-saturated world steer your financial future off course. Equip yourself to discern fact from fiction to safeguard your financial health. Remember, as financial landscapes become more complex, the right guidance becomes essential. Connect with a financial professional for customized advice that matches your individual financial goals. They can understand your unique needs and help you achieve your personal retirement goals better than any online advice column or article. A financial professional can help you feel confident about your retirement planning so goals can become a reality in the future.
Methodology: Ninth Annual Advisor Authority Study, August 2023. The research was conducted online within the U.S. by The Harris Poll on behalf of Nationwide from August 14-30, 2023, among 507 advisors and financial professionals and 2,404 investors ages 18+ with investable assets (IA) of $10K+. Advisors and financial professionals included 274 RIAs, 196 broker-dealers, 143 wirehouse and 52 other financial professionals. Among the investors, there were 636 Mass Affluent (IA of $100K-$499K), 529 Emerging High Net Worth (IA of $500K-$999K), 402 High Net Worth (IA of $1M-$4.99M) and 219 Ultra High Net Worth (IA of $5M+), as well as 618 investors with $10K to less than $100K investable assets (“Less affluent”). Investors included a subset of 464 “pre-retirees” age 55-65 who are not retired.