Why TikTok Shouldn’t Be Your Source of Financial Advice
In recent years, TikTok has taken the social media world by storm, with millions of users regularly consuming and creating content on the platform.
Although it has become a popular source of entertainment, it has also emerged as a platform where people seek financial advice. However, relying on TikTok for financial advice can be risky and might lead to undesirable outcomes.
In this article, we discuss six reasons why TikTok shouldn’t be your source of financial advice and suggest more reliable alternatives.
There Is a Lack of Regulation and Oversight on TikTok
A significant concern with TikTok is the lack of regulation and oversight governing the content shared on the platform. While there are community guidelines, these rules are not specifically designed to protect users from misleading or incorrect financial advice. As a result, financial tips could be posted without accountability, potentially leading to disastrous consequences for those who follow such advice blindly.
Short-Form Videos Limit the Amount of Information and Context Provided
TikTok’s primary appeal is its short-form videos, which are limited to 60 seconds or less. While this format is great for entertainment, it can be detrimental when it comes to financial advice.
Comprehensive and accurate financial advice usually requires in-depth explanations and contextual information that cannot be provided within the time constraints of a TikTok video. This lack of context can lead to misunderstandings and misinterpretations, causing viewers to make poor financial decisions.
It’s Difficult to Verify the Accuracy and Credentials of TikTok Influencers
One of the primary challenges when seeking financial advice on TikTok is verifying the accuracy and credentials of the influencers providing the advice. It can be difficult to determine whether a TikTok user is a licensed financial professional, a self-taught expert, or simply an individual sharing their opinions. Without a proper vetting system, users risk following advice from unqualified individuals, which could have serious financial consequences.
The Upside of Trends Is Discussed, but Rarely the Potential Risks
Many TikTok influencers focus on the potential rewards and positive aspects of financial trends while neglecting to discuss the downsides. By ignoring the potential pitfalls, these influencers can create an overly optimistic view of financial strategies, leading viewers to underestimate the risks associated with their investments.
Advice Is Oversimplified, and Not All Facts Are Presented
Due to the short format of TikTok videos, influencers can resort to oversimplification of complex financial topics. This can result in a misrepresentation of essential facts and create an illusion of simplicity when, in reality, financial matters are often complex and require a deep understanding of multiple factors. Following simplified financial advice without considering the nuances and complexities of financial markets can lead to costly mistakes.
The Goal Is to Get Views, So Information Can Be Sensationalized
TikTok influencers often prioritize getting views over providing responsible financial advice. To attract attention, they may resort to oversensationalized headlines or exaggerated claims, which can encourage impulsive decisions. It is crucial to remember that the primary goal of many TikTok influencers is to gain followers, not to educate or provide sound financial advice.
Reliable Sources for Financial Advice
Instead of relying on TikTok for financial guidance, seek advice from more reputable sources. A few trusted options include:
Fiduciary, fee-only financial advisors: These professionals have a fiduciary duty to act in your best interest and provide unbiased financial advice. They are compensated solely by client fees, which helps eliminate conflicts of interest arising from commission-based compensation.
Reputable websites and publications: Many reputable websites and publications offer valuable financial advice backed by research and expert opinions. Some well-known examples include The Wall Street Journal and Forbes. These sources often provide in-depth analysis, context, and accurate information to help you make informed financial decisions.
Tips for Evaluating the Credibility of Financial Advice Sources
Check for credentials: Look for financial advisors with designations such as the CERTIFIED FINANCIAL PLANNER™ (CFP®) or Chartered Financial Analyst® (CFA®) certifications. These designations require a high level of education and adherence to ethical standards.
Verify their track record: Investigate the background and track record of financial influencers or advisors. Check for disciplinary actions or complaints filed against them with regulatory bodies.
Seek multiple opinions: Consult various sources of financial advice to get a broader perspective and avoid falling prey to one-sided viewpoints.
Be skeptical of “too good to be true” claims: If a financial strategy or investment opportunity sounds too good to be true, it probably is. Always research and carefully evaluate any claims before acting on them.
Gauge transparency and objectivity: Reliable financial advice providers should be transparent about their fees, potential conflicts of interest, and the reasoning behind their recommendations.
Final Thoughts
While TikTok can be an entertaining platform, it is not the most reliable source for financial advice. Instead, turn to trusted sources such as fee-only financial advisors and reputable publications to help ensure you receive accurate, unbiased, and comprehensive financial advice tailored to your unique circumstances.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor today to discuss your personal situation.
This material was generated using artificial intelligence (ChatGPT) and edited by Kaleido Inc. from information derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Roseville and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.