Financial Advice: Don’t Be Fooled

It’s just a coincidence that the month that begins with a day dedicated to fools is the same month that we raise awareness about the importance of financial education. April is National Financial Capability Month (formerly Financial Literacy Month), which highlights “the value of high-quality financial education in improving Americans' financial capability”.

I thought about this noble goal as I read about dual fraud charges from the Securities and Exchange Commission (SEC) and the U.S. Attorney's Office for the Southern District of New York  against the now shuttered student loan assistance company previously known as Frank. The target of the complaint was 31-year-old Charlie Javice, who according to the SEC, “engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims.” Javice, a 2019 inductee of the Forbes 30 Under 30 list, denies the allegations.

In an interesting twist, Javice’s misdeeds were not carried out to scam the users of her service; rather, she is accused of faking the number of users of her service to induce JP Morgan Chase (JPM) to purchase her company for $175 million in 2021. While this was an old school fraud, Javice utilized advanced technology, in the form of a third-party data scientist who helped show an inflated 4.25 million users versus the actual number of less than 300,000.

If a large investment bank like JPM can be fooled, pity the rest of us! How are we to parse the real deal from the fraudsters or the benign but non-credentialed folks who migrate to TikTok, YouTube, Reddit, and the like? Dubious financial advice or get rich quick videos are amplified through these platforms and for some users, it’s difficult to parse real financial education from self-serving claptrap. Many who are touting ideas may have an agenda that is far afield from what is best for your financial life.

As we mark National Financial Capability Month, I encourage people to seek out education, but note that the description from the official declaration of Financial Capability Month that I cited in the beginning of this article was “high-quality” financial education. For that, I encourage you to turn to credible and reliable sources. An easy place to start is to check out the person’s bio to find out whether the source of the information has important professional certifications, licenses or designations. The gold standard of certifications and memberships include: CFP® certification from the Certified Financial Planner Board of Standards (a designation that I hold), CPA Personal Financial Specialists, members of the National Association of Personal Financial Advisors, and Chartered Financial Analyst.

All of these designations require their holders to act and communicate with the public as a fiduciary. A fiduciary duty requires that the person providing advice or guidance acts in your best interest, even if doing so is not in their company’s best interest. It may surprise you to learn that about half of the so-called financial professionals out there do NOT have to put your best interest first. They are held to a lesser standard, called “suitability,” which means that anything they sell you has to be appropriate for you.

If the advice-giver or “educator” has no experience and no qualifications, you can still enjoy the content, but do so with a critical eye. As I warned in my book, The Great Money Reset, these platforms may be fun and entertaining, but know “that you’re entering the mosh pit of investing, sift through what you encounter with a keen and skeptical eye. Try to poke holes in what you hear and not become too emotionally invested.”