The High Costs of Free Financial Advice From Social Media
Written by: Jenny Gattinger, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
“When and how should I start investing?”, “I want to buy a different car. How should I pay for it?”, “How much should I put down on a new house?”
These seem like simple enough questions. With access to thousands of people in our Facebook groups at our fingertips, it is only a matter of minutes before our phone starts dinging with notifications of all the free advice coming in. Simple, free and easy, right?!
Seeing some of the responses to these seemingly simple financial questions as I scroll through my social media feed makes me nervous for the original poster. While I’m willing to bet that the majority of people offering advice have good intentions, it’s important to take the advice you receive from social media strangers with caution.
Let’s break it down.
First of all, when you ask social media strangers for advice, they only see the face value of the question you are asking. They’re not looking at your entire financial picture. Hence, they, more often than not, will answer your question based on what they’d do in their situation. Surely their intentions are great. But you have to ask yourself a couple of questions. Are they in the same place financially as you? Do they have the same financial goals as you? Chances are, they do not. Simply put, what may be a good move for them, may not be the best move for you.
Then, you have to wonder about the financial situation of the people giving the advice. Do the people offering advice have their finances in order themselves? According to this article, CNBC posted an unexpected expense of $1,000 or more would put 60% of Americans into debt. Are the people giving you advice amongst them? Statistically speaking, if you’re living in the United States, 6 out of 10 people indeed are. Also, keep in mind that just because peoples’ Facebook profiles make it look like they live a lavish life, it does not necessarily mean that they do, and furthermore, it does not necessarily mean that they are doing so debt-free.
Look at it this way. Would you take free medical advice from your Uber driver? Your financial future is no less important. A bad financial decision or two could ultimately mean having to work more years, whereas making solid financial choices now could have you kicking your feet up in the sand several years sooner.
What may be surprising to many (myself included as of a couple years ago) is important to note. This has to do with the free advice from the financial advisor. Now that sounds like it’d surely be solid advice, right?
You see, not all financial advisors are created equal. Some work in a fiduciary capacity, which means that they pledge to work in their clients’ best interests. Other, non-fiduciary advisors, however, are not held to these same standards. What does this mean? This means that they work on the premise of making “suitable” recommendations for their clients. Those “suitable” recommendations are not necessarily in their clients’ best interest.
These advisors are ultimately salespeople trying to sell products to earn commissions. In doing so, many advisors will offer “free” financial consultations before reeling in clients to buy their products. Does this mean that all the advice that they give is bad? No. However, you should realize and take into consideration the fact that you may very well be receiving “suitable” advice.
Free financial consultation offers like this appear all too often in Facebook groups today. The last thing you want to do is to end up buying a financial product that you don’t actually need. After all, the money you would spend in years of useless insurance premiums would be much better off invested. Needless to say, following this “free” advice and buying useless products will only take you further away from your financial goals and end up costing you in the long run.
So, is it possible to get free, quality financial advice? The good news is that YES, IT IS! You can start off by heading to your local library and checking out Robert Kiyosaki’s “Rich Dad, Poor Dad”, Napoleon Hill’s “Think and Grow Rich” and “The Millionaire Next Door” by Thomas Stanley and William Danko. Not only will these books teach you about personal finance principles, they will help you grow more confident in making your own financial decisions.
Don’t like to read? You can also check out group and individual financial coaching options by clicking here.
Jenny Gattinger, Executive Contributor Brainz Magazine
Jenny is a personal financial coach, with a passion for helping millennials reach their financial goals. Having completed a degree in Economics, along with Dave Ramsey’s Financial Coach Master Training, she teaches them how to organize their money and put it to work so that one day, sooner rather than later, they won’t have to. A millennial herself, Jenny’s financial savviness has allowed her to follow her dreams of travel and visit 50+ countries as well as compete internationally in two different sports, all while maintaining a sense of financial wellbeing.