Every year, Modera hosts a Summer Internship Program for college students interested in pursuing a career in wealth management. These exceptional young adults work closely with employees throughout the firm to gain real-world experience, learning and collaborating through hands-on projects that enable them to get a glimpse into our day-to-day. The experience is mutually agreeable, as we battle-hardened industry veterans also benefit from their energy, passion, and fresh perspectives.

To celebrate the completion of another successful summer internship program, we want to share some of those perspectives with you. In the following brief, three of our interns break down the investment challenges faced by their generation that older cohorts never had to contend with at that tender age. As a parent of a Gen Z college student, I have experienced firsthand the difficulty of combating the flood of online information with my own research-grounded advice gained through decades of education and experience (No, sweetie, I do not think that sports betting is a solid investment plan.)

For those of us with Gen Z family members, it’s important to understand what they’re experiencing. And let’s be honest, the perils of social media aren’t unique to Gen Z. The advice they have for their peers – to slow down, be mindful, and be discerning in your information consumption – is useful for everyone.

Online and Exposed: Social Media, Gen Z, and Behavioral Finance

By William Craten, Jim Rosenblum, and Natalie Salema

Most readers here will have made financial decisions through a combination of investigation, advice, and patience. For many in Gen Z, the experience of financial decision-making has been drastically altered by a sixty-second video or social media post claiming to reveal alpha within less than a day, and a comment section where confidence is mistaken for conviction. As three Modera summer interns who belong to this generation, we’ve seen these dynamics play out firsthand, whether through stock recommendation from a friend, an investment app notification about an IPO, or a viral post that showed up on our feed. Today’s young investors are the first generation to grow up entirely online, and as a result, they are entering a fundamentally different market environment than previous generations – one that is changing not only where information is obtained, but how investors think, feel, and react to it.

Social media has introduced an entire array of behavioral forces that traditional finance models never addressed. A 2023 joint study by the FINRA Investor Education Foundation and CFA Institute found that Fear of Missing Out (FOMO) ranks among the key factors drawing Gen Z into investing – reframing fear not as a deterrent, but rather as a catalyst. Research further shows that “finfluencer” content actively amplifies cognitive biases like overconfidence, herding, and anchoring in an already emotionally charged environment. This brief examines what that means for the wealth management industry and the Gen Z client of today and tomorrow.

https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/industry-research/Gen_Z_and_Investing.pdf

As the first generation to come of age entirely online, Gen Z exists within an ecosystem of constant connectivity, where financial information, market updates, and investment commentary circulate in real time. This has created a notable generational shift in how financial knowledge is acquired. While older investors are more likely to seek guidance from financial advisors or established institutions, younger investors increasingly turn to social media platforms for insight and direction. Algorithms, designed to maximize engagement, often amplify emotionally charged content that appeals to fear, outrage, or uncertainty, allowing sensational investment narratives to spread rapidly. In an environment where FOMO frequently shapes investor behavior, emotional reactions can take precedence over sound financial decision-making. A single market downturn, paired with a viral post from a “finfluencer” predicting further losses, may prompt inexperienced investors toward costly, short-term decisions. The question, then, is why so many young investors continue to rely on these sources despite the risks.

For many Gen Z investors, particularly college students and young adults with limited financial resources, the appeal lies in the pursuit of financial security during a period marked by rising living costs, economic uncertainty, and a competitive job market. Some “finfluencers” may seek to capitalize on these concerns by marketing “get-rich-quick” courses or trading strategies that imply substantial returns from highly speculative investments. Such content may lack appropriate disclosures and may blur the distinction between education, entertainment, and financial advice. As a result, the boundary between investing and gambling can become increasingly difficult for inexperienced investors to recognize, exposing them to significant financial risk.

As the trend of online investing advice is unlikely to go away anytime soon, it is important for Gen Z, as well as investors of all ages, to take a step back and think critically about what they are looking at online. When encountering investment advice online, it is important not to act on the recommendation right away, and instead to take the time to research or consult with a financial professional before deciding whether that investment is truly suitable for you.

It’s also important to be mindful of the FOMO that this kind of content can trigger. On average, only a small minority of active investors and fund managers – often cited as roughly 5-10% – outperform the market over a long period of time, such as 10 to 20 years.¹ So, the next time you see something on social media claiming to make you rich overnight, it’s worth pausing to ask whether that advice is likely to benefit you, or whether what you’re feeling is simply FOMO.

Behavioral finance has become a far more prominent topic as social media and “finfluencers” have come to dominate the conversation around investing online. While it is possible to hit on a big investment and see outsized returns, the likelihood of consistently doing so over a 10–20-year period may be slim. It is important to keep your long-term financial goals in mind rather than acting on something you’ve seen online. Always stay grounded in those goals and in investments that are genuinely suitable for your situation.