Thanks, TikTok: How Bad Retirement Advice Is Creating Client Risks, Advisor Headaches

Following one-size-fits-all guidance can help get people out of debt and better live within their means, McKnight acknowledged, but the complexity of crafting tax-efficient income strategies that balance lifestyle considerations with longevity risk makes retirement planning a different matter.

“A successful plan for retirement involves personalized, careful planning that is based on sound mathematical principles,” McKnight said. “It’s about strategically balancing a series of interconnected risks, not following rules of thumb or get-rich-quick shortcuts pushed by online gurus.”

Not all advice on the radio or social media is bad, McKnight noted, but a lot of it is, and both uneducated and unscrupulous actors use these venues to spread all manner of financial misinformation to large swaths of the American public.

“People can accuse me of picking on Suze Orman and Dave Ramsey and the like, but I feel compelled to combat some of the bad retirement information they are putting out into the public space,” McKnight said. “The same is true when it comes to the new generation of ‘finfluencers’ who are using their online presence to sow distrust in the tried-and-true, long-term strategies that can help people get prepared for retirement.”

The bottom line, McKnight said, is that financial professionals must be mindful of the significant (and ever-growing) volume of bad advice that bombards the average American who uses the internet to search for information on important topics like saving for retirement. By proactively identifying and refuting bad financial information, expert advisors can help ensure their own guidance is heeded.

The Amplifying Effect of Digital Platforms

When McKnight first started in the financial planning industry nearly 30 years ago, people tended to follow the carefully considered advice he gave them without much pushback.

“Back then, if I was talking with a prospect or client about buying an annuity or considering cash-value life insurance, people would vet that recommendation by talking to their retired father-in-law or maybe a college roommate who had some financial expertise,” McKnight recounted. “Very rarely did that lead to the client coming back to the next meeting with major doubt or confusion about the strategy we had discussed.”

Today, things look quite a bit different.

“Let’s imagine I talk with someone this afternoon about the important potential role of a guaranteed lifetime income annuity in their retirement strategy,” McKnight said. “Well, what’s the first thing they’re going to do after the meeting? They’re going to do a Google search about whether annuities are ‘good’ or ‘bad.’ And what results are they going to get? They’ll see Ken Fisher bashing all annuities.”

Ideally, McKnight said, the investor would be served more complete and accurate information about annuities — including the substantial amount of independent academic research that has clearly demonstrated the economic and behavioral benefits that come along with retirement income strategies that feature guarantees.

“Unfortunately, the search engines tend to amplify the voices that have the biggest followings or generate the most engagement, regardless of the quality of the information being shared,” he said. “In turn, it’s usually the most extreme or provocative voices that amass the biggest followings, so that’s what your clients are going to hear.”

McKnight said that trusted advisors can generally get their clients to look past such messaging and accept the actuarial science-based approach that true experts bring to the retirement planning process. But that effort itself takes a lot of convincing, and it results in significant wasted time and effort that could be put to more constructive use.

The Get-Rich-Quick Problem

There’s a preponderance of poorly contextualized and downright false financial information floating around on social media these days, McKnight said, but among the most concerning issues is the rise of highly performative “experts” who promise to help savers get ready for retirement in as little as five years.

Some of the online “experts” who have caught McKnight’s eye recently include Ramit Sethi and Grant Cardone, whose advice is generally to avoid trusting financial advisors or using 401(k) plans, as well as the myriad of smaller voices advocating for high-risk investing in unproven cryptocurrencies and meme stocks.

“We’re all aware of the image of a crypto bro who’s amazed a huge following by posting about their supposedly incredible track record of buying alt coins and meme stocks,” McKnight said. “They hate the boring old stock market that will take 30 years to make you wealthy, and they think you should, too. I just got into it the other day with a guy on Facebook who was telling people that stocks are terrible.”

Real financial planning experts know that the stock market is the “single-greatest tool of wealth creation the world has ever seen,” McKnight said. They also know about the importance of diversification and risk management in the retirement planning process, especially the importance of mitigating sequence-of-returns risk in the “retirement red zone.”

“If you’re not going to participate in the stock market and take advantage of long-term compounding growth, good luck retiring someday,” McKnight said. “Outside of founding a successful business or maybe owning and investing in real estate, there’s no other way for the average American to reliably get ready for retirement.”

In the flashy world of social media finfluencers, McKnight said, the proven message of slow and steady wealth accumulation just doesn’t generate the attention these “experts” are seeking.

“I understand people’s desire to put their faith in these types of finfluencers who promise to help them get rich in no time at all,” McKnight said. “What’s not to love about the idea of riding some new savvy investing strategy to the moon? The problem is that they don’t have any sort of track record at all. They have no evidence to show that they’re not just a flash in the pan.”

Pictured: John Manganaro