Use an app, get on an online forum or ask your mum — consumers are now using many routes to get do-it-yourself financial advice. Experts say that the all time low in trusting big finance companies has coincided with an all-time high in user-generated content. However, financial advisors caution against relying
entirely on yourself and social media for investment advice.
Saeed Hejazi, CEO and Cofounder, Wally, a recently launched personal finance lifestyle app on iOS and Android, tells GN Focus that its primary users (18- to 35-year-olds) prefer managing their own finances and demand hands-on, self-controlled financial products. “Globally, millennials have a serious lack of trust in the financial industry after witnessing the economic crisis of 2008 and the predatory lending and dishonest behaviour of banks. Surveys have shown that 71 per cent of them would rather go to the dentist than listen to what their banks are saying. When it comes to investment management, millennials are less likely to trust banks with their money than older generations.” The good news is that consumers today are concerned with managing money, instead of blindly accumulating debt. And the response to this demand is visible in the availability of information. James Thomas, Managing Partner at wealth management company Acuma, tells GN Focus, “Since 2009, much more information is available and you can download money management apps. And information is presented in a way that far more people would understand. Even on radio shows, for instance, the people who come on board give a lot of information that [listeners] would not have gotten earlier.”
User-generated content In many cases, consumers would rather turn to each other than trust professionals. Reddit.com, a site more known for its user-generated NSFW (not safe for work) content than its financial tips, runs an active personal finance sub forum, or subreddit, where users request and provide
financial advice. A user with the last name Dude posts, “When I first started, I was at a point where I kind of burned through money — at the beginning of the week thinking, okay, I had $100 (Dh367), now I have $5, and I know nothing of in between. “I was at a net [debt] of around $38,000, all of the debt
was spread over about 11 student loans (I basically took out a loan for each semester of school). Now, almost a year later, that number’s gonna be around 7k
net worth, so I’ve gained 31k. I wouldn’t be anywhere near that had I not learned better from places like this about proper money management and reading
the advice and seeing the stories of others.”
Users also want to find out how others like them are doing — it should not come as a surprise that peers are important to this age group. Hejazi says, “Users lacked the context to understand their financial behaviour. Wally told them they spent 20 per cent of their money on dining out, for example, but didn’t help them understand if this was a lot or a little, relatively. “In our latest update, we’re showing users aggregated and anonymised data about the Wally community to help put their financial behaviour into context. Users can see anonymous information about the financial behaviour of others in the Wally community similar to them, to see how they compare financially.”
The fear of debt
Fear is a good place to start when it comes to debt management. While earlier it would have taken a financial advisor to calculate various debts, now it only takes an app. Common sense advice, which tells you to consolidate all debts and start paying off loans that are more expensive, is scattered all over the place. Now instead of a chartered accountant with a calculator and a superior smile — at least it looks that way from the other side — you have apps that can do the job.
Jessica Cook, Private Client Advisor, AES International Global Wealth Management, believes many expats in Dubai are spurred to save by having extra cash.
“Many expats are seeking money management advice at a younger age. Perhaps this is down to the fact that they are often benefiting from a good tax-free lifestyle as well as paid-for accommodation. “Expats often find that they have a larger amount of surplus cash at a younger age, which they would not ordinarily have in their home country. It’s the climate. Younger people are becoming savvier and realising that they should start saving earlier,” says Cook.
Don’t tell me what to do!
Consumers who are interfacing with big brands are slow to trust information they may perceive as biased. Hejazi says that one of the important features
of Wally is that it does not tell you what to do. “It will never tell you are spending too much, or should be saving more. We are focused on giving users as many relevant insights into themselves and their own behaviour, and they can do what they wish with it. We’ve built the whole product to allow people to take control of their money and know at all times exactly what is going on with their finances.” So the app and others like it let users obtain a complete picture
of their finances — cash, checking, savings, investments and loan accounts all neatly laid out on a screen. Even though it may seem so, the DIY finance trend is not entirely driven by young adults. Some asset classes have always been managed personally. Cook says, “Individuals will often invest in fixed income or property without seeking help.”
And it’s not only the millennials who are going online for financial advice. Reddit.com has numerous questions addressed to retirees asking what tax bracket they expected to retire in and which they finally landed in, among other things. You need help For many consumers, once the basics are taken care, DIY may no longer be enough.
There is plenty more to do if you need to invest wisely and well. One of the reasons of going to a financial advisor is to seek a diversified portfolio, which means that your money is not tied up in a single currency, location, or type of asset. “Individuals who want to create a more diversified portfolio across a range of asset classes should seek professional advice,” says Cook.
An investment advisor may be just the person to tell you when to stop. In some cases, there may be more sophisticated avenues for investing in your favourite asset class. Thomas says, “Your advisor can guide you on how much you can allocate to that investment. In addition, if you are an investor who likes gold, for instance, there are funds where you don’t have the expense of storing the metal. An ETF is a cost-effective way to have access to metals. Similarly, real estate funds allow you to access property that would have otherwise cost you a significant amount of money. Moreover, an advisor may help you evaluate and enter other world markets.”
Preferential rates are more likely to be open to professionals. Cook says, “Advisory firms will have relationships with financial institutions, banks and
insurance companies that may allow you access to investments at an institutional rate. Often for a retail investor, investments can be far more expensive
or you may need a larger capital sum in order to access that investment.”
