More people than ever are taking control of their money – but where do they go if they're after financial advice? While 'finfluencers' are appealing to younger investors, ensuring any advice comes from a qualified adviser gives you a better chance of meeting your goals.
Since the pandemic began, more people have become interested in investing, particularly in the share market. Research house Investment Trends found about 435,000 new investors bought shares for the first time in 2020 and of these 18 per cent were aged less than 25, while 49 per cent were between 25 and 39. This influx of investors brings a new challenge – that of educating this group on investment strategies. So, where should they go for advice?
Generally, if an investor wants advice, they seek out a financial adviser. A report into financial advice highlights demand for advice has doubled over the past five years. It found three out of four advised clients engaged with their adviser during lockdown while 2.6 million non-advised Australians said that they intended to seek advice. This demonstrates an increase in awareness of how valuable financial advice is. Other research backs this up. Rice Warner's 2020 report – Future of Advice – found those who receive advice accumulate 3.9 times more assets after 15 years than those who make their own decisions.
The rise of the ‘finfluencer’
However, not everyone is going to a qualified financial adviser to discuss their financial needs. Over the past few years, financial influencers or ‘finfluencers’ have emerged, dispensing (often questionable) advice via social media platforms. Described as social media content creators that build audiences through providing financial advice, finfluencers can be found on platforms such as TikTok, YouTube, Twitter, Instagram and Reddit. But should people be taking their advice?
Some finfluencers have shown their audiences take quite a lot of notice of them. For example, the number of trades in the US video game retailer Gamestop took off after it was pumped on Reddit and tweeted about by Tesla founder Elon Musk. But it's a case of buyer beware with these unlicenced and mostly unqualified sources. In fact, the Australian Securities and Investments Commission has been dealing with rising numbers of complaints relating to unlicensed financial advice since March 2020 - when the pandemic began.
But while the advice of some finfluencers may be suspect, they do appeal to a particular audience – such as Millennials and Gen Z. There are also some finfluencers who appear to help people better engage with their finances. But while finfluencers can provide useful tips on how to save or budget, sharing investment tips and strategies is where inexperienced investors need to take care. It's important to be very wary of investment advice, especially if someone is pushing a scheme that they benefit from personally.
Why a qualified financial adviser?
While a finfluencer doesn't need to have any particular expertise (and often doesn’t), anyone giving financial advice must hold an Australian Financial Services Licence (AFSL) or be acting as an authorised representative of an AFS licensee. Anyone wanting to become a financial adviser must also complete a full-time professional year that includes at least 100 hours of structured training.
If you're serious about building your wealth and meeting your financial objectives, a qualified financial adviser whom you can build a relationship with over time, is the best person to provide you with the advice that will guide you at every life stage.
So how does financial advice help investors? Some of the areas an adviser can help with include:
The benefits of seeking advice are many. An IOOF paper – The True Value of Advice – reveals the long-term benefits that financial advisers provide, with 90 per cent of advised clients surveyed saying that accessing financial advice has left them in a better position financially and 89 per cent reporting that receiving advice allowed them to live their desired lifestyle.
It's also important to remember that financial advice is not just for those nearing retirement. Seeking advice early on could make a big difference to your finances at all stages of your life, such as when you're buying a property, starting a family, or wanting to access your superannuation.
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