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BOITUMELO NTSOKO: Social media has been a game-changer in communication and information sharing, and platforms such as TikTok, YouTube and Twitter have become popular avenues for people seeking free financial advice. This has led to a rise in ‘finfluencers’ who promise great tips to help you reach financial freedom. However, it can be dangerous to take money advice from social media and ‘finfluencers’.
So how can we separate financial fact from fiction on social media, and is there a way to use it to our advantage? Thulisile Nkomo, who is a private wealth manager at NFB Private Wealth Management, joins us on this episode to help us navigate this topic. Welcome, Thulisile.
THULISILE NKOMO: Thank you for having me, Tumi.
BOITUMELO NTSOKO: Thuli, why do you think people are turning to social media for financial advice?
THULISILE NKOMO: Social media offers a free service to users, and people might find it attractive as they might not want to pay for the professional services of a financial advisor. As a result, they resort to social media as an alternative to traditional financial advice. It is also easily accessible because all you need is just your phone or a computer. So some people prefer to do that rather than to just go and look for a financial advisor or to make an appointment with a financial advisor.
You find that some content creators do have a financial background and experience in the finance sector, so people warm up to them. I often find that social media content is synonymous with instant gratification, which more social media users are after.
So most users relate more to it and it also creates a safe space to talk about money because if we look in the past, talking about money was seen as taboo.
And for people who don’t come from a background where they have [others] they can talk to about money, it helps break those financial barriers because it gives them access to people who are talking about money on the internet.
BOITUMELO NTSOKO: And what are some of the dangers of accessing this advice on social media?
THULISILE NKOMO: Social media is democratised and the advice offered might be based on personal experience and may not necessarily address individual needs, as financial advice is not a one-size-fits-all solution. The financial advice that is provided on social media may not be verified, so it is important that you do your own due diligence and research the information that you receive on social media about financial advice.
Sometimes the information is more emotional than logical. So, for instance, when the market crashes someone can say to you: ‘Cash out … so you can prevent any further losses.’
Also, certain content creators publish with their own personal interest in mind, where you find that they are biased because they’re looking for ‘views’, they’re trying to be popular, they’re running a certain campaign and they’re financially endorsed.
As a result, the intention might not actually be to your benefit as the user. And many content creators may not even have the skills or experience to even offer the professional financial advice.
BOITUMELO NTSOKO: Just staying on that, can you give us an example, maybe of incorrect financial advice that you’ve seen online?
THULISILE NKOMO: There are those who say: ‘It’s always better to buy a house than to rent, because the house is an appreciating asset.’ That is not entirely true because the cost of owning a house goes beyond paying off a bond. There are other ongoing costs of owning a house like rates and taxes, levies, insurance, power and water. So failure to make this consideration is what puts most homeowners into misery after they realise that they cannot keep up with the monthly cost of owning their house.
BOITUMELO NTSOKO: And how can someone separate financial fact from fiction?
THULISILE NKOMO: There are free websites similar to what Moneyweb is offering, where qualified financial advisors offer their services by writing articles and giving information to the public.
You also find that on an institutional website.
People can familiarise themselves with that content, and through that, they’ll be able to understand fact from fiction because, if you look, there are so many content creators out there that it becomes very tricky to decide what information to follow.
So the safest path to follow would be to seek services or a professional financial advisor, or you can always ask a friend or family member to refer you to a financial advisor they’ve dealt with.
So that would be a key move to make.
BOITUMELO NTSOKO: Thuli, do you think ‘finfluencers’ should be required to be licensed or regulated in some way to ensure they are held to a certain standard of conduct?
THULISILE NKOMO: In essence, to give out any form of financial advice to a person, you need to be a representative of an authorised financial service provider [that is] registered with the FSCA [Financial Sector Conduct Authority].
You need to have a certain qualification; you need to have experience and product information.
So influencers should rather take a similar route because issuing a licence will paint out a full picture that they’re qualified to offer financial advice, whereas in actual fact [if they haven’t done this] they are not.
Influencers don’t take accountability for the advice they offer.
So if individuals suffer financial losses as a result of the financial advice they received online, the user will have no recourse.
If [the person is] licensed to give advice, they will give advice that is accurate, and they’ll be responsible in terms of the content that they create for their users.
BOITUMELO NTSOKO: What role do you see ‘finfluencers’ playing in shaping the financial literacy and culture of the next generation?
THULISILE NKOMO: Financial influencers definitely challenge most social media [users] to pay attention to their finances.
They create, well, awareness about financial literacy and they also help in general financial literacy because some people might not have the know-how [in terms of] finances.
So they really help in that space.
BOITUMELO NTSOKO: Before we wrap up, do you have any final advice for our listeners regarding accessing financial advice on social media? Is there a way for them to use these platforms to their advantage?
THULISILE NKOMO: Information and advice on financial [matters] is instantly available across all social media.
So before following any of it ensure that the source is reputable and sticks to your personal financial situation. Make use of articles published by reputable financial companies, instead of opinion pieces written by unqualified people.
It is most advisable to seek the services of a financial advisor because they offer advice that is unique to your personal financial situation.
You can use social media to your advantage to take some of those questions to your financial advisor and ask ‘How does this affect me and my personal plan?’
So for me, I just feel that money decisions should not be taken from a three-minute video that you find online.
Rather take your time in actually looking for a solution that is suitable for you, because the services that we provide as financial advisors are custom-made for an individual, and we take into account a lot of information – like your term horizon – if you’re looking to make an investment. What is your tax profile? What is your risk profile? What are your cash constraints, your fears and your understanding about financial literacy? And we also hold you accountable for the decisions you make.
So we actually become your partners in achieving your personal goal, instead of us just seeking popularity and views online. So that’s what I feel is more important.
BOITUMELO NTSOKO: Thank you so much for joining us on this episode, Thuli.
THULISILE NKOMO: Thank you, Tumi. It was nice to be with you.
BOITUMELO NTSOKO: That was Thulisile Nkomo, who is a private wealth manager at NFB Private Wealth Management.
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