Are you adjusting your nest egg based on a tweet from your investment adviser?

Hopping onto the social media bandwagon, financial-planning and investment professionals are increasingly turning to outlets like Twitter and Facebook to interact with customers. Roughly 3,000 investment professionals currently participate in StockTwits, an online community that uses the Twitter platform to discuss investment ideas and business news. Some advisers have their own YouTube or streaming online video channels. Charles Schwab now has a twitter handle, @CharlesSchwab and a Facebook page. Investment houses PIMCO and TIAA-CREF also maintain Facebook pages and Twitter feeds, while Vanguard posts comments from readers on its corporate blog.

While the tweets, blogs and postings can be helpful to retirees and other investors, they’re not exactly disinterested sources of information. Investors need to be wary of the potential for self-dealing, says Charles L. Failla, a financial planner at Sovereign Financial Group in New York. “Any time that you have an organization that is trying to promote themselves, you need to be careful that they might be talking to their own book,” he says. “For instance, if firm XYZ is promoting XYZ’s mutual fund, there is clearly some bias there.”

The web site MyMoneyManagement.net, for example, is run by the Financial Services Roundtable, a financial services industry group. The tips and information available at the site come largely from the Roundtable’s members — 100 of the nation’s largest financial firms, including Fidelity Investments, Legg Mason (LM) and Genworth Financial (GNW) — and help promote their marketing efforts.

What’s more, the generic nature of the advice could work against investors, says Failla. “In general, it’s a bad idea for the public to get information from sources that isn’t tailored to fit their needs,” he says. “Acting on general advice can end up doing more harm than good.”

While the Securities and Exchange Commission and other regulatory bodies have yet to weigh in formally on the dispensing of financial advice through social media, existing regulations are strict, says Scott E. Talbott, the senior vice president of government affairs at the Roundtable. “Due to the legal uncertainty surrounding advice and the anonymity of the users, the sites offer generic investment advice based on generally accepted investment principles.” For instance, the fine print attached to Charles Schwab’s Twitter foray says: “We’ll be providing company information, not advice or answers to account-related questions. Please keep in mind we’re part of a regulated industry with some pretty strict rules on replying and having dialogues in these types of forums, so if you don’t hear from us, don’t take it personally, we’re just playing by the rules.”

To get around this issue, TD Ameritrade offers third-party advice and tools on its site within its “Research and Ideas” section. For instance, investors can check out Jaywalk Consensus Report, which compiles investment rating data from independent research providers. Users can also access independent experts at Minyanville’s Buzz & Banter forum.

An alternative is to bypass investment company channels completely. Mint.com and BillShrink.com, for instance, aim to help consumers make smarter financial decisions. (See our story 6 New Financial Web Sites for more on other start-up investment sites.) But note that some seemingly impartial sites might also contain a degree of bias, says Failla. For instance, some sites have arrangements with sponsors that may lead to conflicts of interest. Newcomer HelloWallet, doesn’t have such relationships, however, its independence comes with a price — $5 a month.

Published June 11, 2010

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