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TikTok lures Gen Z with personal finance advice, but what are the risks

Antoine Iskandar recently spoke with Arabian Business answering the following questions regarding the use of TikTok for personal finance advice. 

What are the risks of younger people taking personal finance advice from uncertified or self-proclaimed experts on TikTok? 
It can be risky to follow personal finance advice from unqualified or self-declared experts on websites like TikTok, especially for younger people who may have little experience handling their finances. The following are some possible dangers:

    1- Fraud & Scams: There is a chance of running into outright frauds or scams on social media. To trick young people into making unsafe investments or disclosing sensitive financial information, some people may assume the persona of financial experts.
    2- Lack of Accountability: People who identify themselves as experts on social media may not be held responsible for the results of their recommendations. There might be little redress available to individuals harmed if their advice causes financial losses for their followers.
    3- Lack of Personalization: There is no one-size-fits-all approach to personal finance; what works for one individual may not work for another. TikTok designers are unable to offer specialized financial advice based on a person's particular financial status and ambitions.
   4- Incomplete Information: The information on TikTok videos about money might not be complete or thorough because the videos are very short and lack details. Young people might not fully understand a financial topic, which can cause them to make bad decisions.
   5- Confirmation Bias: Social media algorithms often only present users with content that matches what they already believe and are interested in. If a young person listens to a self-proclaimed money expert who promotes a specific way of investing or managing money, they might hear one-sided information that supports what they already think, without considering other opinions.
   6- Misleading information: Some people on social media who claim to be experts might not have the right qualifications or experience to give reliable financial advice. They might accidentally give wrong information, which could cause young people to make bad financial choices.
   7- Overemphasis on Risky Strategies: TikTok creators sometimes encourage people to take risky approaches to investing, like day trading or speculating on cryptocurrency, without explaining the dangers involved. Younger people might be more easily influenced by these tactics without fully grasping the possible outcomes.

What should TikTok beware of when it comes to personal finance videos on the platform?
TikTok must exercise caution regarding personal finance content due to potential issues that could arise. While TikTok serves as a valuable information and entertainment hub, it has to ensure that users are shielded from harmful or deceptive personal finance content. TikTok's vigilance should encompass several critical aspects, including combating misinformation to prevent financial harm and safeguard its reputation. Moreover, TikTok should be wary of permitting content that promotes risky investment strategies without adequately disclosing associated risks, fostering informed decision-making among its user base. Content creators must substantiate claims with evidence or sources, ensuring transparency in financial discussions. The platform should emphasize the importance of diversifying investments and actively discourage overconcentration. TikTok must also proactively identify and remove fraudulent schemes while educating users about common financial scams. Partnering with reputable financial organizations and introducing educational features can provide users with accurate financial information. An accessible reporting system for misleading or harmful financial content is essential, with swift responses to user reports. By addressing these concerns and monitoring personal finance content, TikTok can create a safer, more informative environment and build trust among its user base.

Anything else to add? 
TikTok is a great platform for young people to learn about personal finance. It makes complicated financial ideas easier to understand and relate to. However, it is very important to understand that TikTok's short videos cannot provide detailed financial advice. You should think of it as an extra tool for learning about money, not the main source. While TikTok can give you ideas and help you get started, it's important to be careful and not believe everything you see. Make sure to check information from trustworthy sources to be sure it's true. For important money choices like investing, planning for retirement, or managing debt, it is crucial to get help from certified financial experts. Basically, TikTok should be used as an additional tool for learning about finances, supplementing traditional financial education. This will help people have a complete and informed approach to managing their money in the future.

The full article can be read here: TikTok lures Gen Z with personal finance advice, but experts warn of risks.

This article was written by corporate lawyer Antoine Iskandar and focuses on personal finance advice on social media.

BSA is a regional Law Firm in the Middle East with offices in the UAE, Oman and Saudi Arabia. As a full-service law firm our practice areas include litigation, arbitration and corporate services, including M&A, banking & finance, Intellectual Property, TMT, Fintech, employment and insurance.

Published on 7 September, 2023.

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