In a series of TikTok videos that went viral earlier this month, Patricia Milan, the user behind the Business Women’s University account, bragged about maxing out her credit cards and getting $150,000 in cash to buy an Airbnb unit. The plan, he explained to the audience, was to pay off his debt with the income from the rent. A second video gave advice on how to achieve high credit card limits by creating a series of circular transactions within their own company, which is actually illegal in many jurisdictions.
Milan did not respond to a request for comment via its various social media accounts. But financial experts threw cold water on both strategies put forward by the entrepreneur, suggesting that it was far from sound financial advice. Worse still, Milan is far from the only influencer touting unsound financial principles.
This conceit has proven to be a very attractive promise on TikTok, where TikTok videos tagged with the hashtag #wealth were viewed 55 million times last month, according to the platform. Those tagged with the hashtag #millionaire were watched 69 million times in the last 30 days, while #financialfreedom videos were watched 20 million times. There’s just one problem: A recent study by stock research platform WallStreetZen found that 63% of stock-related videos on TikTok are misleading. Worse still, 95% of them don’t include any disclaimers regarding investment risks.
“If people follow this advice, there will be no one to blame,” says Christine Kieffer, senior director of investor education for the Financial Industry Regulatory Authority (FINRA), an independent, nonprofit organization that represents brokers and foreign exchange markets. “The point is, don’t go to YouTube or TikTok. Talk to a real person.”
Kieffer believes that many people’s reluctance to disclose their financial concerns or problems also plays a role in the popularity of financial advice videos because there is “a degree of information that people can glean without feeling like they’re revealing their own personal information.”
Some of the more questionable TikTok guidelines involve routing all your household expenses through an S-corp. avoiding taxes, taking a family vacation every year through your job, and hiring your kids for a $12,000 salary to help them stay tax-free. “It feels really awful to do this, but it’s kind of a way to avoid paying taxes,” TikTok user Julia Hurley says in a video. However, the IRS’s own website suggests that S-corps and their shareholders may be liable for some taxes, and the fraudulent use of S-corps to avoid taxes otherwise due has been under the IRS’s microscope for at least 10 years. . “This is a very common money laundering scheme,” adds Chris Whalen, a certified public accountant based in New Jersey.
Part of the problem is that detailed, accurate tax advice is “too complex for a 60-second video,” Whalen says. He fears the influence of those who offer financial tips without real expertise, who are placed alongside real experts and presented as their equals. “Some people give advice as if it’s legal and it’s going to get people in jail,” he says. This could be a problem on a massive scale, given that three-quarters of Gen Z rely on platforms like TikTok and YouTube for financial education, according to research.