More than one-third (39%) of Americans under the age of 65 are receiving their financial advice online or from social media, according to a survey by the National Association of Personal Financial Advisors.
And over one-third (34%) of Millennials and Generation Z Americans said that a lack of financial guidance is inhibiting their ability to prepare for retirement. Millennials reported feeling the most unprepared when it comes to their future (38%), with about 30% of Gen Z respondents feeling unprepared.
Getting Advice From Social Media
More than one-fourth of Gen Z Americans receive their financial advice from social media. YouTube seems to be the most popular place for Gen Z (63%) and Millennials (71%) to discuss financial planning, while TikTok is gaining popularity with Gen Z (56%), according to the survey.
More than 60% of the respondents who receive their information online said that they have acted on that advice.
"It's great to see people enthusiastic about seeking out financial information and helping others financially succeed. The survey shows that 54% of Generation Z respondents aren't preparing financially for retirement, so if social media can pique their interest, that's a good thing," said Geoffrey Brown, CEO of NAPFA. "However, it's important to note that advice found online isn't personalized or tailored to individual goals and needs, leading to potentially greater risk-taking, consumer harm, and a piecemeal approach."
Also, Brown added, consumers going online or turning to social media for financial advice may not be savvy enough to know whether the information is credible or not, and many of these resources do not steer them to a place that caters to their particular financial needs.
Different Strokes, Different Folks
The survey also revealed differences in the way generations are contributing to their nest eggs. Approximately 38% of respondents use an employer-sponsored benefit like a 401(k); 24% use individual retirement accounts (IRAs); 30% invest in stocks, and 19% report investing in cryptocurrencies. IRAs are less popular among younger generations.
Only 22% of Millennials and 19% of Gen Z respondents claimed that they have investments in an IRA, while 35% of Baby Boomers and 23% of Gen X claim to have one for their investments.
Alternatively, nearly 1 in 8 Millennials and Gen Z Americans are turning to micro-investing apps, such as Stash and Acorns, to prepare for retirement. Younger consumers are attracted to these apps because of today’s app-based culture, Brown explained. But while using apps is easy and a good entry point, they will only get them so far.
For various reasons, nearly 1 in 6 of survey respondents said that they feel they have "screwed up" their retirement; over 16% of those respondents believe they have screwed up their retirement by listening to unqualified financial advice. One in 5 does not have a retirement plan and has no idea when they will be able to retire, and over half of Millennials (57%) considered starting a side gig to boost their contributions to their retirement savings.
Need For Financial Advisors
Consumers are not using financial advisors as much as they should because they are not fully aware of all of the benefits these professionals offer, added Brown, and they do not understand those benefits. To make themselves more appealing to more consumers, advisors should “meet them where they are” and customize their messaging and service offerings to the groups they are targeting,
The NAPFA Consumer Survey was conducted online by Atomik Research among 2,006 adults ages 22 to 64 in the United States. The fieldwork took place between November 8 and 12, 2021.
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]