The financial advice gap and the impact of social media among the under-25s

A 2021 report from Open Money has found that only 7% of UK adults paid for financial advice in the last two years. This compares to 10% when the report was conducted in 2020. Not only that, but of those who haven’t received advice, only 12% plan to do so in the future.

Encouragingly, this figure rose for under-25s, with 21% of those surveyed saying that they planned to receive advice in the future.

Of those who have received advice in the last two years, 90% found it helpful. When asked “Why did you pay for advice?”, 43% answered that they valued the service provided by their adviser.

The value of financial advice

Back in 2019, the International Longevity Centre released a report that looked to quantify the value of financial advice.

It found that those who received professional financial advice between 2001 and 2006 were, on average, £47,706 better off by 2014/16. Of the £47,000 “additional” wealth, £31,000 was held in pensions, with more than £16,000 extra coming from non-pension wealth.

The report also found that building an ongoing relationship with an adviser led to pension wealth almost 50% higher on average, when compared to someone who only received advice once.

Financial advice doesn’t just offer financial benefits either. The report found that advice could improve emotional wellbeing too, mainly through:

  • Increased confidence in your financial future and the plans you have in place
  • A sense of control over your finances and increased knowledge of financial issues
  • Peace of mind that your finances are stable and that you and your family are financially protected.

At Expert Wealth, our team of Charted financial planners fully understands the benefits advice can bring. While there is some evidence that this benefit is understood by the under-25s, the advice gap report also unveiled a worrying trend among this age group.

Social media influence

The under-25s are the most likely age group to be planning to get advice in the future. They are also increasingly likely to be willing to pay for it and unlikely to see cost as a barrier. In this year’s report, 11% of 18- to 24-year-olds were concerned about the cost of advice, down from 25% in 2020.

Worryingly though, 9% of respondents in this group also confirmed that they have turned to social media platforms such as TikTok and Instagram for financial advice.

This is an issue because the advice that is given by supposed experts on these sites often involves non-FCA-regulated areas, such as foreign exchange funds. Social media users might also find themselves chasing investment trends advocated by these platforms, and thereby risking huge losses.

Your children or grandchildren could be misled by influencers who unwittingly put their names to scam investments.

Other online advertisements, meanwhile, use images of celebrities without consent and include false endorsements designed to appear genuine.

Some recent examples of social media issues include: Reddit users encouraging inexperienced investors to buy stock in GameStop to undermine short-sellers; Dogecoin’s rollercoaster losses and gains resulting from single comments by SpaceX CEO Elon Musk; and Martin Lewis’s campaign asking the government to tighten up on financial scam adverts online.

Key lessons to teach the under-25s

Back in July, we wrote about five simple lessons to help your grownup children manage their money and these included:

  • The importance of an emergency fund
  • Budgeting basics
  • Paying off high-interest debt first
  • The importance of protection
  • The need to speak to experts.

These all still apply, but we would also add these key concepts of investment and long-term financial planning:

1. Be patient

Investment is a long-term prospect, so while the big gains available through trend-chasing might sound appealing, there is the potential for huge losses too. Understanding your risk profile and long-term goal is the best way to see risk-managed returns and to make your investment goals a reality.

2. Ignore the noise

Social influencers and would-be scammers proliferate online but only if their “advice” is taken up. Unregulated schemes and advice without appropriate disclaimers might mean bold claims are made, but these “opportunities” will rarely be able to deliver.

Remember that if a deal looks too good to be true, it probably is. Ignoring the noise of these intentionally loud outside parties will allow you to concentrate on your own plans.

3. “It’s time in the market, not timing the market”

The general trend of the stock market is upward and so, even accounting for short-term blips, your investment is likely to see healthy returns over the long term, especially if you also factor in the effects of compound growth.

Get in touch

With decades of experience in financial services, our Chartered financial planners have the expertise to help you and your loved ones make the right choices around their investments and long-term financial plans. If you have any questions, please get in touch and speak to us today.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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