Threat of bad advice: A more crucial aspect of financial literacy is not just what to do with money, but also what not to do with it
Brandolini formulated this insight after reading Daniel Kahneman’s book, Thinking, Fast and Slow, and watching a heated political debate on Italian TV. Having watched many TV debates in India, I fully sympathise with Brandolini. The nonsense does tend to flow freely in political debates on TV. However, that’s not what I want to discuss.
Apart from TV, the rise of social media and its army of finfluencers have made this principle more relevant than ever. These influencers often peddle bad personal finance advice with little accountability, leading many to make poor financial decisions based on dubious recommendations. In investing, the problem is exacerbated by an industry that actively encourages people to deceive themselves. This issue has become so pervasive that Sebi is starting to take serious action against it.
However, the problem looks very different from the perspective of regulators, compared to that of individual investors. From a regulatory standpoint, the focus is ensuring that anyone providing financial advice is properly regulated. However, for individual investors, regulation alone does not guarantee safety. We have all encountered bad, self-serving advice from regulated intermediaries. Whether this advice comes from a YouTube finfluencer or a bank’s relationship manager, the damage to the investor is the same.
Therefore, it’s practical to set aside the notion that only unregulated sources provide poor advice. Instead, we should develop a personal methodology for recognising and ig-noring bad
