Survey finds 25% of people act on financial advice from social media

Our ‘In Focus’ campaign this month explores how younger generations are reshaping the advice landscape, from where they turn for financial guidance to the expectations, priorities and behaviours advisers need to understand.

Active Chartered Financial Planners examines the growing influence of social media on investment decisions, highlighting the risks of acting on fast-moving financial content without proper checks.

One in four people are acting on financial tips they see on social media without much hesitation, a statistic that should give anyone in this profession food for thought.

We all know the way people access financial information has changed, particularly younger investors. Increasingly, they are not looking for advice through established channels but on TikTok, Instagram, YouTube and wherever else the algorithm decides to send them next.

Research highlighted by Active Chartered Financial Planners, drawing on Barclays data, suggests that 25% of investors feel under pressure to act quickly on opportunities they see on social media. That says a lot about the sort of environment these platforms create, making everything seem immediate and urgent with very little room for reflection.

You can see the attraction because social media makes investing look straightforward and accessible to everyone, using language that is easily understood. For someone making financial decisions for the first time, that can feel far more approachable than traditional advice.

But that simplicity can be misleading, worryingly more than half of those using social media for investment ideas say they do not regularly check whether what they are seeing is credible. At the same time, 42% of people who have acted on social media-led investment ideas say they have lost money.

Of course, people losing money on investments is hardly new, but the difference now is the way decisions are being shaped. A short video, a persuasive personality and a sense of urgency can carry more weight than experience, qualifications or regulation.

That is part of what makes this difficult because for younger audiences in particular, familiarity can look a lot like trust. Someone who appears confident, successful and easy to understand can quickly be treated as a reliable source, whether or not they have any real expertise behind them. Celebrities have even been used, or rather supposedly used, to sell financial advice and products but some have proven to be using the name with absolutely no real link to the person.

For advisers, the challenge runs deeper than simple competition with social media. Younger clients are approaching financial information differently and they expect it to be easy to access, quick to absorb and clear in its relevance to their lives.

Traditional advice has tended to be built around long-term relationships and, quite often, clients with established assets. But that does not mean younger people do not need advice, often making complicated decisions with less experience, less confidence and more outside noise.

Regulated advice brings judgment, context and accountability and it gives people the chance to step back, weigh things up properly and make decisions that stand up over time.

There is obviously a regulatory angle to all of this, and that should not be ignored. But there is also a broader behavioural shift going on and social media is changing not only where people get financial information, but how they judge it and how quickly they are prepared to act on it.

For financial advisers, the response should not be to mimic the tone or tactics of online influencers but be clear about the absolute need for proper professional advice. At a time when so much financial content is built to provoke a reaction, there is real value in helping clients slow down and think.

That may prove especially important as younger generations build their financial habits. The platforms may change, the format may change and the personalities certainly will, but the need for calm, well-judged advice is not going anywhere.