September 28, 2023
Gen Z’s Social Media Dependency Is A Bridge, Not Barrier, For Advisors
Forbes Money Gen Z’s Social Media Dependency Is A Bridge, Not Barrier, For Advisors Kenny Rose Forbes Councils Member Forbes Finance Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) Sep 28, 2023, 07:00am EDT | Share to Facebook Share to Twitter Share to Linkedin Kenny Rose is the founder & CEO of FranShares, a platform that makes it easy to invest in franchises. Read the State of Alternative Assets . getty Older adults have worried about Gen Z investing habits since members of this generation were old enough to open their first bank accounts. Financial planners and advisors have spilled a lot of ink over their outsized allocation to crypto . They’re afraid fear of missing out will drive this generation to risky money choices. But their greatest concern revolves around a habit that characterizes Gen Z’s entire investment strategy: relying on social media for financial advice. Gen Z’s dependence on social media for investment advice is well documented. By a couple different surveys, some 49% - 79% of Gen Z use platforms such as YouTube and Instagram as go-to sources. With each new report comes the same narrative: Social media has revolutionized young people’s access to financial information, including their access to unqualified and deceptive advice. Looking closer, there’s some subtext to this hand-wringing. Financial advisors and wealth planners may be worried about the shape of their own roles. What need will the generation that relies so heavily on social media have for a financial advisor? For those wondering what the future of financial advising might hold for Gen Z, new data might offer some hope. MORE FOR YOU Ukraine’s Improvised Fighting Vehicle Is So Slow That A Soldier Can Walk Just As Fast Powerball Jackpot Rises To 925 Million Here s What The Winner Will Take Home After Taxes FC Barcelona Charged With Bribery For Referee Payments Face Champions League Exclusion Reports Gen Z May Not Be A Lost Cause For Qualified Financial Advice Our company’s State of Alternative Assets report, the latest to capture Gen Z’s investment habits, surveyed over 1,000 U.S. investors with at least $10,000 in investable assets. In line with other reports, it found that 47% of Gen Z used social media for investment advice . It also found that only 17% consult qualified financial advisors. That’s nothing new. But the investment habits of another generation—millennials—may provide some context for the potential of advisor-Gen Z relationships. Our report found that 31% of millennials rely on social media for financial advice. And they’re much more likely to work with financial advisors; 41% say they consult a financial advisor when researching an investment. This data suggests that Gen Z may not be a lost cause for professional financial guidance. Like Gen Z, millennials also grew into adulthood with a world of financial information at their fingertips. That access hasn’t stopped them from seeking relationships with financial advisors. The oldest millennials are in their early 40s. While homeownership may still be out of reach for many, they’ve been in the workforce now for nearly two decades—long enough to accumulate some degree of wealth. As Gen Z matures and advances in the workforce, they’ll also start to face complex financial decisions, such as whether to grow their savings or pay down their student loans. It’s reasonable to expect that they too will learn to recognize the value of expert financial guidance. In fact, financial advisors may have an immense opportunity to work with Gen Z as they mature not despite their social media habits, but because of them. Opportunity For Advisors Bad investment advice proliferates on social media. Financial advisors can bring much-needed credibility and personalized guidance The good thing about Gen Z’s dependence on social media for investment advice? Because platforms such as YouTube and TikTok have opened the floodgates to so much free financial information, younger generations have been empowered to explore investment ideas untethered by the traditional advisor-client relationship. Therein also lies the danger of social media and, subsequently, an opportunity for financial advisors. Anyone can create a TikTok or Instagram account and start sharing personal finance tips, no training or compliance required. Anyone, that is, except for professional advisors, who have to follow extensive Financial Industry Regulatory Authority advertising regulations . When the very people who are the least qualified to give financial advice online are seemingly the ones most uninhibited from doing so, social media feeds can quickly get clogged with misleading financial misinformation. It’s no coincidence social media has been abused by so many scammers —a significant portion of whom are targeting crypto. Given this, Gen Z needs to be especially careful when engaging with social content pushing certain financial strategies. A 2021 Credit Karma study found that younger generations don’t exercise nearly enough caution when engaging with personal finance content online: 37% of surveyed Gen Z and millennials said would they take financial advice from social media at face value. If anything, Gen Z’s social media habits carve out a huge value-add opportunity for financial advisors. Advisors have the chance to position themselves as trusted authorities, bridging the gap between reliable recommendations and the wide-ranging scope of financial content Gen Z consumes. Conclusion Familiarizing themselves with Gen Z’s favored social media content can give financial advisors insights into this generation’s investment priorities, perspectives and aspirations. For instance, since Gen Z has a strong appetite for alternative assets such as cryptocurrency, they might not be receptive to an aggressive stocks and bonds strategy. If reducing their risk exposure to crypto is the goal, shifting their portfolio to lower-volatility alternative assets (such as real estate, farmland and franchises) might resonate better. So long as advisors do the fieldwork to ensure their guidance can address Gen Z’s unique financial circumstances, there’s no doubt they can work alongside social media. Getting an investment idea from TikTok is as easy as scrolling through the platform. Acting on that idea with confidence requires a deep understanding of what strategies will work for your own finances. That’s where financial advisors can give their young clients some much-needed credibility and personalized recommendations. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify? Follow me on Twitter or LinkedIn . Check out my website . Kenny Rose Editorial Standards Print Reprints & Permissions
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