How to Leverage Social Media for Financial Advice
When you think of seeking financial advice, most people don't think of social media as a resource. Traditionally, you had to go to a bank or a brokerage house to get fresh financial advice. Now, with the advantages of social media, you can link up with advisers or like-minded investors online to discuss all types of financial information.
Seeking a Financial Adviser
Social media offers numerous opportunities to finding the right financial adviser for your needs. While the end process of selecting an adviser is usually the same — meeting in person and getting to know each another — social media can leverage your time by eliminating hours of pre-meeting research. Previously, you only had the advice of friends to rely on — or worse, a generic advertisement for an adviser.
Social media sites let you read up on an adviser's educational background and experience in the industry. You can also set up online chats through sites such as Facebook to get to know an adviser a little better before meeting in person.
Researching Investment Options
Independent investors who don't need or want the assistance of financial professionals can leverage the power of social media for their benefit as well. Social media is all about community and you should be able to find a group of like-minded individuals with whom you can swap ideas.
Some investment clubs have their own sites where you can do research on aspects of the financial markets that interest you, while many large investment firms also provide solid information via social media. Sites such as Twitter, offer the chance to get quick but non-professional input on any question regarding investment themes or products.
As financial technology has improved, many services that were solely in the domain of the private adviser have now moved online. Services such as Betterment, Wealthfront and FutureAdvisor allow investors access to so-called "robo-advisers" that allocate their investments based on inputs such as risk tolerance and investment goals.
Motif Investing, which creates 30-stock portfolios based on specific investment themes, goes one step further. It adds a social media component, allowing investors to discuss ideas and motifs with each other in online forums. Following the motto that "everyone's an expert in something," Motif allows users to create their own motifs and present them to the community.
The strengths of social media can also pose problems when it comes to financial advice. The feeling of community that's inherent to social media can hide the motives or expertise of those in the group who are providing advice. It's easy to feel like you can trust someone you've had a few online exchanges with, but do you really know if you're receiving sound information? If others on social media report impressive investment results, can you take those statements at face value?
Another concern with social media is its speed. In a world where investors are accustomed to getting immediate information, it's easy to expect immediate investment results as well. An old investment saying states that, "it's time in the markets, not timing," but that can be a hard lesson to learn in the real-time world of social media.