2 days ago

Fiduciary vs Finfluencer: When Consuming Financial Advice, Source Matters

I will just say in general, I’ve said SO many times, 99% of you watching do not need a financial advisor. You need someone like me to teach you step by step how to invest for yourself”. So says Tori Dunlap, one of the many outspoken influencers brimming with financial opinions that cannot be contained.

Like a bottle of Diet Coke shaken up by outside forces, the froth of conjecture can only go one way once an outlet is found. There is no dialogue, only a microphone and a sermon. A tough position from which to deliver advice on a uniquely complex topic like your finances.

Money, as with health, is situation specific. There are fundamental truths for wealth building that are universally applicable for which nuance makes no difference. Axioms like ‘underspend your means’ and ‘invest with patience’ being two examples.

For these axioms, the finfluencer impact on culture is quite valuable. Saving should be encouraged as should a low time-preference mindset. We need to be reminded from time to time to reinforce sound money behaviors that challenge our discipline.

But make no mistake, the influencer’s advice may be worth less than you pay for it. It’s not as if these individuals are paragons of altruism responding to a higher calling. Otherwise, they wouldn’t have monetized channels.

“You need someone like me…”, should be interpreted as “you need me”. I wonder why?

With little to no access barriers, online financial advice has become the go-to source for many, especially our younger generations. Understandably so. Who wants to spend money on something that can be procured for free?

Popular influencers demonstrate a degree of social proof as they flex their follower counts and video download statistics. Surely this translates to workable solutions for the masses!

It works until the details you can’t decipher start to matter. And that’s if you’re lucky enough to follow a finfluencer that isn’t a complete charlatan. The risk of misadvice is higher online.

There’s absolutely no consumer protections if you happen to follow advice disseminated by such channels as they generally fall under the Publisher Exclusion (Section 202(a)(11)(D) of the Investment Advisors Act of 1940).

As proponents of financial wellness, Ben and Brent encourage the accumulation of knowledge to this end. They discuss the pros and cons of finfluencers, how what they do is different and how a good advisor can compliment your favorite influencer(s).

The most important takeaway is to maintain an ability to think critically. Inspect any recommendation with too broad an application. Statements like “99% of you should …” are red flags.

Having analyzed thousands upon thousands of individual scenarios, Ben and Brent can attest that no situation is alike. Your mom said you were special, and you are.

Sources:

On The Rise of Finfluencers

https://www.aboutschwab.com/mss/story/the-rise-of-finfluencers

https://www.wsj.com/personal-finance/stock-market-social-media-financial-influencers-c41c4456

Finfluencer Hot Takes

https://www.youtube.com/watch?app=desktop&v=6IQsSuYagrI

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About your Hosts

Ben Jones, CFP®

Managing Director, National Wealth Management Group

www.nwmgadvisors.com 

Follow him on X @thekaratstick