The million dollar TikTok decision
This year I’ve had several clients and prospective clients tell me about where they have been getting their financial advice—in addition to talking with me. Some are hooked on YouTube for home improvement, silly cat and financial videos. I have to admit, I am spending more time in this space, too. In fact, our firm has spent time developing short videos on a range of financial topics in order to better communicate with our clients and potential clients. Of course, we know that everything you read or watch online is fact, right?—Not.
Yet, an increasing number of people are relying on videos and social media channels for financial information and potentially financial decisions.
One thing that I have noticed over the years is that there is a big financial literacy deficit among Americans. This is concerning to me because at the same time the number and types of financial instruments have proliferated over the past 25 years. In addition to stocks and bonds, there are now cryptocurrencies, private equity, private credit, hedge funds, leveraged ETFs and the list goes on. For our parents and grandparents, Certificates of Deposit and a company pension were once the only investments most people considered. With increased choices and financial decision making transferred away from employers and on to employees, making good financial decisions has only gotten more complex.1
Enter the internet and social media
Now you can learn about just about any investment by watching a 60-second TikTok video. In many ways people can learn more about investing than ever before. Just as Tom Silva of This Old House has showed me how to re-roof my shed, there is a wide range of financial experts explaining investments. Most have good intents and are trying to help but some have hidden agendas.
The unregulated pitch
Many people do not realize that licensed investment professionals have significant responsibilities to their clients. They are also heavily regulated by state and federal authorities. However, most journalists and many financial bloggers are not. As such, they can pitch specific investments without knowing whether it is appropriate to everyone in the audience.
Investment professionals, specifically, Certified Financial Planner® Practitioners must always place their clients’ needs first. CFP®s must also perform due diligence to understand their clients’ needs, goals and objectives. Only then can a recommendation be made and it must be made by putting the client’s needs first. YouTubers and financial bloggers do not (unless they are licensed or CFP® professionals).
Roth conversions for everyone!—Are you “everyone”?
A great example of how social media advice might hurt you is the popularity of doing Roth Conversions. A conversion, in its simplest form is taking a traditional, pre-tax IRA rollover or 401(k) and turning it into a post-tax Roth IRA or 401(k) account. The videos have become so popular this fall that we are getting calls or emails every week about them.
Since every person and family has unique financial circumstances and goals, shouldn’t their strategies also be tailored to their particular situation? That is the question we ask every time this comes up. No two investors are alike; no two taxpayers are in the same exact tax situation. As such, Roth conversions can be a great strategy, but only for those in certain situations. One size does not fit all.
As I have watched countless videos about how to reconstruct a retaining wall, I have found certain channels have the experience, knowledge and reputation that supports a quality solution and others do not. (Yes, I am addicted to “This Old House” and “Ask This Old House” videos!)
Finding experienced professionals on your side
So, before you start converting your million-dollar IRA to a Roth, consider your source, their experience and whether they are a Certified Financial Planner® or not. Just as you might spend hours researching a major appliance or car purchase, you should do the same when it comes to your finances and assets.
Two good places to go to find qualified help are the Certified Financial Planner® Board (https://www.cfp.net/) and the Financial Planning Association (https://www.financialplanningassociation.org/.
If you still have questions, give me a call. I’m happy to help. You can schedule a quick call with me by clicking HERE.
Lyman H. Jackson
Lyman@PlanWithFPS.com
617-630-4978
1.That doesn’t mean you can’t make good financial decisions on your own. It just means that there are more options to consider and making good decisions may take more time and expertise.
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