Blogs, online media sway investor decisions

While regulators and compliance departments are slowing easing off restrictions for advisors’ use of social media, the public is already basing financial decisions on what they read online.

A survey conducted for Investors Group found that 42% of Canadians who save and invest are using social and online media to guide their decisions.

The preferred sources for financial information are the websites of financial services firms, traditional media and investment firms (40%). At least the content of the financial services and investment companies are regulated. But 6% said they use information gleaned from blogs, Facebook and Twitter.

Scary stuff.

The internet is rife with inaccurate information on virtually any topic you can name, but the dangers of relying on unqualified financial advice are probably second only to unqualified medical advice.

The good news, albeit relative, is that 66% of those surveyed rely primarily on their financial advisor. Other sources of financial advice include the ever-reliable friends and family (36%) and traditional print, TV and radio (29%).

Perhaps it’s a commentary on financial literacy, but the survey found that Canadians consider online sources as being more credible (38%) than family and friends (30%). Traditional TV, radio and print media were trusted by only 28%.

Despite the presence of a sales motive, 43% said they trusted financial institutions over recognized financial journalists (39%).

“The social network is re-shaping the financial world and how, when and where consumers receive their financial information,” says Christine Van Cauwenberghe, director, tax and estate planning at Investors Group. “Online and social media are becoming go-to places for information and research purposes but Canadians still rely on expert, professional advice”

Not surprisingly, those between the ages of 18 and 29 are more likely to consider Facebook a useful source of financial advice (30%) than overall survey sample (11%). Seventy-two percent of young investors consider financial blogs useful information sources.

“While younger Canadians are generally more social media literate than their older counterparts, they may not have the same breadth and depth of investing knowledge,” says Van Cauwenberghe. “Appropriate professional advice remains an important factor in making investing and saving decisions. Collaborating with a professional, especially when starting out, can help investors make informed, confident decisions about important investing and financial matters.”