Navigating the pitfalls: Young investors and the impact of online financial advice

Insurance
05/12/2023 News

In a landscape dominated by online financial information, a recent survey by Nationwide's Advisor Authority reveals that a significant portion of young investors, aged 18-54, have acted upon misleading or factually incorrect advice encountered on the internet or social media platforms. With the rise of generative artificial intelligence (AI) and online influencers contributing to the influx of financial guidance, the study sheds light on the varying degrees of trust and susceptibility across different generations.

Key Findings:

1. Online misinformation and actionable advice

Over a third (34%) of non-retired investors aged 18-54 have acted on financial information seen online or on social media, only to find it misleading or incorrect.

Among younger investors, 41% of Gen Z and 34% of Millennials have fallen victim to such misinformation, showcasing a significant impact on their financial decisions.

2. Generational variances

Younger investors, particularly Gen Z and Millennials, are more likely to access financial information through social media (42%) and trust generative AI (21%) for financial guidance.

In contrast, older generations, such as Baby Boomers, exhibit a more cautious approach, with only 6% acting on misleading online advice.

3. Trust in advisors using AI

A notable percentage of Gen Z (34%) and Millennial (37%) investors express increased trust in financial professionals who incorporate AI into their counseling process.

Younger investors are supportive of AI being used by advisors to streamline administrative tasks, with 40% of Gen Z and 36% of Millennials stating they would trust advisors more in such scenarios.

4. Advisor response to AI and misinformation

Advisors are cautiously experimenting with AI, with 31% planning to use it for data insights, 27% for client onboarding, and an equal percentage for client education.

Despite the experimentation, 58% of advisors are actively educating clients on the potential risks of misinformation found on social media and generated by AI.

As the financial landscape evolves with the integration of AI and the growing influence of online platforms, the survey highlights the critical need for investor education and the discernment of reliable sources. While younger generations are more open to AI-driven advice, the study underscores the importance of a qualified financial professional to guide clients through the complexities of online information, ensuring that decisions align with their best interests. Advisors are proactively addressing the challenges posed by misinformation, emphasizing the significance of verified, reputable financial advice and encouraging clients to adhere to long-term financial plans to avoid impulsive decisions.

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