In 2023, the SEC charged multiple celebrities for illegally promoting cryptocurrency on social media. And the fallout from the crypto collapse has been staggering: according to Reuters, as of October 2023, $30 to $35 billion worth of crypto was still locked up in cryptocurrency bankruptcies, impacting millions of investors.

But the lawsuits have not slowed the number of financial advice influencers — or “finfluencers” — publishing content on social media sites like YouTube, Reddit and TikTok. In fact, social media has become a primary source of financial advice for Millennials and Gen Zs: a recent Forbes survey found that 79% of young adults surveyed have gotten financial advice from social media, and 57% say they’ve taken advice on investing in stocks and bonds from social media.

Oscar Pineda-Madrid, digital strategy leader - innovation at Commerce Bank, shares insights on how consumers should approach the growing volume of financial advice being published on social media.

Treat your financial health like your physical health.

“My advice is to treat your financial health like you treat your physical health,” says Pineda-Madrid. “I’m a fan of short form educational content on social media and I absolutely see the appeal, but just like I consult with my doctor on health decisions, I turn to trusted advisors and do my own research when it comes to financial decisions.”

This is not to say that all financial advice on social media is bad. “Just like there are some credible health experts on social media, you can find good authors and experts sharing sound financial advice too, especially around saving and budgeting,” says Pineda-Madrid. He advises following experts who have established their credibility by publishing best-sellers or teaching at an accredited university.

When it comes to financial influencers: trust, then verify.

On the other hand, Pineda-Madrid is cautious when it comes to taking investment advice from social media. “I go back to the old adage of “trust, then verify.” There is inherent risk in both traditional stock trading and newer, more exotic investments like crypto and NFTs (non fungible tokens), so it’s wise to round out any advice you hear on social media with advice from people you trust in your own life, whether it’s a financial advisor or your own family and friends.”

Research supports Pineda-Madrid’s view: a recent study by stock research platform WallStreetZen found that 63% of the stock-related videos on TikTok were misleading.

Know the difference between licensed investment advisors and financial influencers.

The same WallStreetZen study found that less than 1% of people posting stock advice on TikTok had any finance-related credentials at all. While credentialed investment advisors must pass professional exams and disclose conflicts of interest like being paid to endorse a product, anyone who has a webcam can be a finfluencer. Professional investment advisors must also follow strict laws to protect consumers like you, unlike finfluencers. Finally, remember that finfluencers aren’t compensated based on whether their advice is sound. Instead, they’re compensated based on how many likes, shares, and follows they get. They are incented to entertain, not educate.

Do your own research.

So the next time you see a “can’t-miss opportunity” on your favorite social media platform, think of it as a jumping-off point to do your own due diligence, says Pineda-Madrid. “In the digital age, we have a lot of resources at our fingertips, and with something as important as your finances, your research time will be time well spent.” Talk to friends and family, and consider working with a financial advisor whose responsibility is directly tied to you and your bottom line.