Gaining access to financial information is now easier than it has ever been, thanks in large part to social media. But on the flip side, access to misinformation — or unverified advice — is also becoming more prevalent, which can lead to financial pitfalls, especially for younger generations.
Indeed, the ninth annual Advisor Authority study, powered by the Nationwide Retirement Institute, found that more than a third (34%) of non-retired investors aged 18-54 have acted upon financial information seen online — or on social media more particularly — that turned out to be misleading or factually incorrect.
This is also relevant for younger generations, as 41% of Gen Z investors and 34% of Millennial investors have acted on misleading or factually incorrect financial information.
Rona Guymon, senior vice president of annuity distribution at Nationwide Financial, said these findings were not surprising, nor is the fact that younger investors are falling prey to online financial misinformation more often than their older counterparts.
“Turning to the internet for efficient and accessible information is second nature to younger investors, so they are more likely to come across unverified financial advice,” said Guymon. “Older investors tend to be just a little more cautious about information they find online, making them less likely to fall victim to misleading advice from online platforms.”
In fact, as Guymon noted, Nationwide’s survey showed that only 6% of baby boomers have encountered and acted on misleading advice they found online.
Work With a Financial Professional
Another factor that comes into play is that older investors are also more likely to have an established relationship with a financial professional who they trust to provide the right guidance.
“We don’t want younger investors to stop using the internet for research. However, I’d like to see them develop a better way to verify that the information they find online makes sense for them,” she said. “An advisor or financial professional is one way they can do that, particularly when it comes to making big financial decisions.”
As Guymon noted, there’s a lot of good financial advice to be found online, yet it’s also easy to come across guidance that may not be appropriate for your personal financial situation.
“Financial advice is not a one-size-fits-all proposition. It’s important to remember that most of the information you find online does not take into account specific factors impacting your life or personal finances,” she said. “In some cases it can be just plain bad advice for anyone. Either way, acting on online advice without verifying your approach with someone you trust can pose great risks to your financial security.”
Seek Out Reliable Sources
Investors shouldn’t be discouraged from learning about financial planning on their own. Informed investors are engaged investors, so seeking out reliable sources from verified platforms is a good thing, said Guymon.
Yet, it’s important to scrutinize the financial sources you find online and discuss any changes you may be considering with an advisor before you make them.
“Advisors can provide clear, personalized and actionable advice to ensure you remain on track based on your own unique needs and goals,” she said.
Lower Your Financial Stress
Finally, as Guymon explained, the growing demand for financial information comes at a time when many people are feeling increasingly stressed about their personal finances.
In turn, financial planning struggles can stem from debt overload, lack of savings, inflation, high taxes or feeling underprepared for retirement.
“Financial stress can quickly compound, leaving investors wary, confused, and vulnerable to making bad decisions with their money and savings,” she said. “It’s understandable they’d turn to online sources to get more informed and make better financial decisions.”
However, the prevalence of financial misinformation online makes it a reasonable possibility that investors could run into trouble by following bad advice.
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This article originally appeared on GOBankingRates.com: 4 Ways Young Investors Can Avoid Faulty Financial Advice Online as One-Third Fell Victim in Past Year