Always, always follow the money.
– Mutual fund companies want to sell you their funds.
– Brokerage firms want you to hold your accounts with them.
– Financial news networks need your eyeballs to sell advertising.
My absolute rule of thumb for evaluating any kind of advice is to follow the money.
When we interview potential new business partners or vendors, I always want to know exactly how THEY make money.
Understanding that usually explains everything you need to know about their business model and their fee structure.
For instance, it might feel warm and fuzzy that Robinhood started the “commission-free” trading trend. But if you look deeper, you see they are just making their money on the back end through selling your order flow. And that’s totally fine. But it kills the illusion that they eliminated commissions to the detriment of their own revenue out of the goodness of their heart.
So, coming full circle to TikTok financial advice: Influencers want eyeballs. They want views and engagement, just like the financial news.
And because they usually aren’t actual financial advisors—meaning they aren’t regulated by the SEC and aren’t required to adhere to strict compliance rules – they can pretty much say whatever they want to get your attention.
My favorite recent trend is the “Stop paying income taxes by putting everything in a kids’ trust!” hack. Magic!
Except they conveniently leave out the fact that doing so completely removes control of that money from your hands. It is literally no longer your money.
The devil is always in the details.
I’m not anti-social media advice at all.
But it’s similar to getting advice from an AI chatbot: Trust, but verify.
