Are Social Media Influencers Out Influencing Financial Advisors?

More than half of Gen Z and millennial investors take financial advice from social media, according to Betterment.


Illustration by RIA Intel

Whether you’re a casual investor or a professional asset manager, you’ve probably heard of Roaring Kitty, otherwise known as Keith Gill, a Youtube persona and popular Reddit poster who operated also under the moniker DeepF---ingValue.

While not the first ‘finance influencer,’ he is one of the most notorious, after Gill and other Redditors coordinated a short-squeeze of video game retailer GameStop that nearly blew up a $12.5 billion hedge fund.

Two years later, Gill is still revered by many retail investors. And many Americans say they now turn to social media and social media influencers for investment advice, according to a new study by robo-advisor firm Betterment. Advisors should take note.

Betterment surveyed 1,200 investors in March across four generations — Gen Z, millennials, Gen X, and baby boomers — about how they received financial information and how they acted on those insights. The company found that financial advisors were the most trusted source of financial advice, with 67 percent ranking it in the top 3, while social media influencers were the least trusted, with 22 percent ranking it top 3. However, the survey also found that investors with an advisor were more likely to take advice from a social media influencer (58 percent) than those without an advisor (15 percent).

Dan Egan, head of behavioral finance at Betterment, told RIA Intel that while this may seem counterintuitive, it actually makes a lot of sense. “Sometimes we get caught up in, ‘Are people making really serious life decisions off of this specific video or this Reddit post?’ And I don’t think that usually happens,” Egan said. Instead, most people use information learned on social media as a springboard to do more research and connect with experts. “We’ve seen this for a long time with doctors complaining about WebMD,” he said. “There’s more information out there, but people still want to be able to go to some sort of a trusted authority figure.”

All told, about 40 percent of investors said that they had taken advice from social media and 70 percent said they felt that social media coverage addressed their needs.

Generationally, younger investors were much more likely to use social media for advice. According to the survey, 65 percent of Gen Z and 55 percent of millennial respondents said they took financial advice from social media compared to just 31 percent of Gen X investors and 4 percent of boomers.

And the advice is not all bad.

Of those who listened to advice from social media, 87 percent reported that the financial move they made fared either very or somewhat well and only 1 percent said it worked out badly. Eleven percent saw no real impact.

In addition to seeking advice elsewhere, investors also get their market news from sources other than financial advisors. A Morningstar study this month found that investors ranked advisors at roughly the same level they ranked trading platforms and business and financial news websites for value provided. According to Betterment, TV and online media publications are the most common ways investors get their financial news, with 42 percent and 41 percent of respondents choosing these options respectively. Social media platforms, friends and family, and financial advisors were chosen next, with 31 percent each.

Forty-three percent of millennials reported using social media for financial news, more than any other generation, including the digital-savvy Gen Z with 38 percent. Thirty percent of Gen X-ers got their news from social media, and only 10 percent of boomers did so.

Younger generations turning to social media for advice is a missed opportunity for advisors. Over the next 25 years, millennials alone are expected to inherit $27.4 trillion, while members of Gen Z stand to inherit $11.5 trillion, according to Boston-based research and consulting firm Cerulli Associates. Research by Fidelity published in January showed that nearly two-thirds of Millennial and Gen Z investors believe that working with an advisor is key for financial success.

Rather than ignoring the influence of social media, advisors should use that knowledge to engage and educate investors.

Benjamin Lake, a financial advisor with Miracle Mile Advisors, an RIA with about $4.5 billion in AUM, said that while he works with a range of clients, his primary clients skew younger. “A lot of them are on social media constantly and they’re getting news or advice there. But I’ve found that a lot of them are looking at those posts or videos and then getting my opinion on them,” Lake said. They rarely act on financial advice without first checking in with him, Lake said.

Over average, Lake said he probably gets a couple of inquiries a month about information or advice his clients have seen on social media. But Lake doesn’t see the proliferation of financial information as a bad thing, but rather as an opportunity to work with and educate clients.

“I’m a pretty big believer that the amount of financial education as people grow up in this country could be a lot better, but having more information and education sources is certainly a good thing in my opinion. However, there are a lot of bad actors on social media, people who are trying to push a certain thing, whether it’s good for the people, their audience, or not,” said Lake.

“My advice is to always bring it back to what makes the most sense for the client. ‘Can you afford this level of risk? Do you understand these other kinds of risk associated with these kinds of investments?’ Making sure they’re making those decisions with their eyes wide open is the most impactful thing you can do to have those conversations,” Lake said. “And even if you don’t have expertise in it, it’s okay to say ‘I don’t know enough about that, so if you want to explore it, I can work with you,’ and do your research about it.”

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