New generations of investors are finding innovative ways to get financial advice.
From Reddit to TikTok, social media is becoming one of the places financial investors flock to for economic wisdom. Though turning to social media for information isn't novel, the scale at which younger generations (Gen Z and Millennials) are gravitating toward online communities for financial advice is new. According to recent surveys, one-third of Americans under 65 use social media for financial advice. Let's explore why many consumers turn to social media for financial advice, the value it brings them, and how a social media strategy can benefit your financial brand.
Did COVID-19 Change How Consumers Receive Financial Advice?
COVID-19 has impacted how people address finances and investments. The accessibility of new technology, the rise of mobile-friendly banking apps, and the growth of social media have made it easier for the average consumer to find financial advice online. So when it comes to financial advice, where do people go first? The answer—that depends.
Who is using social media for financial advice?
Most consumers use social media to give opinions on brands and services across industries. The field of personal finance is no exception. But, chatting about personal finance on social media (and sharing memes about crypto) isn't for everyone.
Gen Z leads the way in using social media for financial advice
A recent study reported 56% of Gen Z and Millennials intentionally seek out general financial advice online or on social media. Topics like credit card debt, budgeting, home buying, and investing are just some of the areas of financial guidance they seek online. And research from Creditcards.com found that though Gen Z mostly turns to friends and family for financial advice (53%), around 28% turn to social media and influencers.
When you think "financial advisor," who do you picture? Is it an older person sitting behind a desk with authority and years of experience, or a young person just starting down their financial path? For many young people, the notion of a financial advisor sounds intimidating (and expensive). So, it may not surprise you that many young consumers seek out the advice of people who look like them through social media.
And on social media, there's no shortage of financial educators, mentors, and coaches who have taken to social platforms to offer their financial expertise. Social media has provided opportunities for younger generations to increase their interest in saving habits, spending opportunities, and investing. In fact, research from the Motley Fool reports that 91% of Gen Z (ages 18-24) investors use social media for advice just on financial investments.
Social media has seen a boom in financial influencers, Reddit boards dedicated to retail investing, and TikTok channels #moneytok and #stocktock have 3.8 billion and 362 million views respectively. But, don't be fooled to think that it's only Gen Z that places trust in social media for financial knowledge. Investment firm TIAA found that one-third of all Americans act on financial advice found on social media, and a nearly equal amount of people listen to advice from influencers and celebrities.
Why are consumers turning to social media for financial advice?
Media has always been front and center for financial opinions. Publications like Bloomberg and the Wall Street Journal garner millions of readers who search for the advice of authors and apply it to their lives. But social media has expanded access to financial advice. TikTok videos with the hashtag #personalfinance were watched 5.75 billion times, and other online platforms have carved out specialized communities dedicated to serving up financial tips. The She's On The Money Facebook group boasts over 200,000 members who actively share money triumphs and losses and ask investment and budgeting questions.
01—Financial influencers' reach expands through social media
Financial influencers (also called “Finfluencers”) can inspire and empower millions of people to take control of their money. This niche of influencers has grown over the past years on social media, reaching even more viewers with platforms like TikTok, YouTube, and Instagram. COVID-19 and retail investing catapulted financial influencers onto mobile screens more than ever before. And tapping into the success of financial influencers may lead to a higher level of brand recognition. Take "Finfluencer" Haley Sacks, @MrsDowJones, who has 247,000 followers on Instagram. She uses her financial expertise and pop culture references to teach people how to control their finances. Her shareable content helps viewers look at their finances and encourages them to make smart investments.
02—Financial illiteracy pushes consumers to social media for financial advice
Ultimately, why consumers choose social media to answer their financial questions may come down to access and education. Multiple studies show that most Americans are not financially literate. A study from Global Finance Literacy Excellence Center found that 63% of Americans are considered financially illiterate.
So, if financial education is not learned in the classroom, where do you go?
Beyond friends and family, if you're looking for affordable financial advice, there's actually not much available to the average person. People either go to a financial advisor or people go to Google. For example, a quick search on Google for "personal finance advice" will bring up 1.2 billion results. Even if you had time to read every page, it's daunting—how do you know where to start? Well, for some people, following the right content on social media can lead to the right financial guidance (and in a fun and relatable way).
Convenient, creative content drives consumers to social media
95% of Americans ages 18-49 own a smartphone. It's quicker to access information if it's at your fingertips, and it’s easy to digest. The rise of social media as a source for personal finance advice comes down to several factors:
The content is relatable. When content comes from someone who looks like you and talks like you, you tend to believe them. Participating in social media groups and engaging with content can make people feel like they’re a part of a community and builds trust with the personality advising.
The content is entertaining. No one wants to read articles that spout off numbers and figures about investments. Instead, social media videos about finance are often engaging and fun.
The content is available “on the go.” Reading a long article about budgeting and retirement plans is time-consuming and can be overwhelming social media on the other hand is generally short, consumable, and convenient. People on the move, can open an app, watch a 3-minute video, and learn what they need to know.
Five reasons to invest in social media marketing
Social media is increasingly becoming a part of people's everyday lives. With over 4.2 billion active social media users, it's essential that your financial service business has an active social media presence to ensure you are reaching people throughout your community. Here are five reasons why financial service providers should be using social media:
01—Build stronger relationships with customers
Everyone wants to work with someone they know and trust when it comes to money. Social media can help you build relationships with your customers by identifying important financial moments in their lives and providing valuable insights to address those moments. Social media can also help you nurture leads through social selling.
02—Boost your brand awareness
Being active on social media can highlight how your business stands out from your competition. Don't put your social presence on autopilot. Create assets that showcase your brand voice, tell customers who you are, and how you can solve their financial problems. The more they see your valuable content, the more likely they will turn to you for advice.
Influencer marketing boosts Betterment
With Gen Z flocking to social media for investment advice, a partnership with a financial influencer may help you promote products to a younger audience. When Betterment, a robo-adviser focused on helping new investors received 10,000 sign-ups in one day, they were shocked. Where did this flood of customers come from? It turns out that TikTok financial influencer Austin Hankwitz, @austinhankwitz, had posted a few videos describing how to retire a millionaire using the platform. Seeing the elevated brand awareness (and new customers) from his TikTok videos, Betterment quickly hired Hankwitz to name-drop their service on social media.
03—Humanize your brand
Financial advice doesn't have to be clinical. Social media is the perfect way to humanize your brand and personalize your offerings. To truly engage with your customers, it has to feel like they're talking to another human. With a peek at the people behind the brand, social media can make your brand appear more trustworthy and establish credibility with consumers.
How Goldman Sachs is Winning at Social Media
Goldman Sachs is a renowned leader in the banking industry. But, Goldman Sachs has also seen the value of gaining a steady following on social media. In the second quarter of 2021, the investment firm gained 6,000 more followers on Instagram and nearly 13,000 more via Twitter. How'd they do it? By humanizing their brand and creating a series of videos called "Talks at GS" that included famous guests like author Malcolm Gladwell. The videos are posted on YouTube, and bite-sized versions are shared on their Facebook and Twitter pages. Goldman Sachs uses the power of storytelling to showcase the human side of banking to build trust with its audience.
04—Gain industry insights
If you're trying to learn about innovations or consumer trends in the financial services industry, social media may provide some of the answers you're looking for. As part of your market research efforts, monitoring competitors' social media can help you stay on top of what's happening in your field and provide you with hints to new trends and industry disruptions.
05—Elevate the customer experience
When it comes to repeat business, 93% of customers return to brands that offer excellent customer service. Social media provides an opportunity for an open dialogue with your customers to provide high-quality customer service. You can also quickly gather customer feedback to better understand what they expect from financial service providers. Responding to customers on social media can lead to a stronger business relationship, and it shows that you care about your customers.
Having the most innovative product or best customer service won't launch you into the big league. What will help you get there is knowing how to reach your customers and hold their attention. Fintech and financial service providers can't ignore the power of social media. The pandemic and the growth of social media have changed the nature of client relationships, and customers expect brands to be engaged online. So, be present, be active, and meet consumers on the platforms they use every day.
Do you want to be a brand consumers turn to for financial advice? We’re here to help. Let’s chat.