FOMO, overconfidence and why young investors still need advice

Confidence and vulnerability, at the same time

One of the more nuanced findings in CFA Institute's March 2026 research is the simultaneous picture of confidence and vulnerability it paints of younger investors. These are not contradictory. They are two sides of the same coin.

Young investors are, by many measures, better equipped than previous generations at a comparable stage. They have grown up with financial information readily available. They have entered investing earlier, often through workplace pension schemes or digital platforms. Many have lived through significant market events and continued investing through them. Their financial literacy, at least in basic terms, is higher than stereotypes suggest.

But the same environment that has produced this confidence has also created conditions for specific, well-documented behavioural risks to take root. The CFA Institute research identifies several of these clearly: susceptibility to fear of missing out, overconfidence in interpreting market signals, and a heavy reliance on information sources whose quality is variable and whose incentives are often misaligned with the reader's interests.

Understanding these risks, and what good professional guidance does to address them, is the final piece of the picture this series has been building.

FOMO and the pull of trending assets

Fear of missing out is not a new phenomenon in investing. The tendency to buy assets that have recently risen in value, because others appear to be profiting and the cost of not participating feels large, has driven speculative bubbles throughout market history.

What is new is the environment in which it operates. Social media has made it possible to watch, in real time, as a community of investors discusses and celebrates the performance of a particular asset. The social dynamics that produce consensus and momentum in online communities can amplify the pull of trending investments in ways that a newspaper article from the 1990s simply could not.

The CFA Institute research found that younger investors show a meaningful susceptibility to FOMO-driven decisions, particularly in relation to cryptocurrency and other trending assets. Separate research cited in the report found that 45% of US Gen Z investors were motivated to start investing in the first place by promotional incentives, including cash, crypto or stock rewards from trading platforms designed to encourage early adoption.

This is not a criticism of younger investors. It is a description of the environment they have entered. The appropriate response is not to ignore the pull of trending assets but to develop the structures and habits that allow an investor to make considered decisions within it, rather than reactive ones.

Overconfidence in reading the market

The research also identifies overconfidence as a meaningful risk. Young investors who have seen their investments perform well in rising markets, or who have spent time absorbing financial content online, can develop a degree of confidence in their ability to read market conditions that outstrips their actual track record.

This is a well-established cognitive bias, not unique to any generation. But it is particularly relevant for investors whose most formative experience has been in a period of broadly rising asset prices, or who have learned about investing primarily through content that is designed to be engaging rather than comprehensive.

The adviser's role in this context is not to undermine a client's confidence or suggest they know nothing. It is to provide the perspective that comes from experience across multiple market cycles, the humility that comes from having seen confident predictions fail, and the discipline that connects individual decisions to a long-term plan rather than a short-term narrative.

Where young investors get their information

Young investors draw their financial knowledge from a genuinely diverse range of sources. The CFA Institute survey found that advisers, apps, social media platforms, so-called finfluencers, online forums, and AI tools all feature in how Gen Z and millennials learn about investing.

Around one third of respondents had already used generative AI tools for financial education. This figure is likely to rise. AI tools can be genuinely useful for explaining concepts, walking through options, and helping investors think about their situation. They are not a substitute for personalised advice, which integrates an individual's specific circumstances, tax position, risk appetite and long-term goals in a way a general-purpose language model cannot reliably do. But they are changing the information landscape in ways that advisers need to engage with rather than dismiss.

Social media occupies a more complicated position. Previous research cited in the CFA Institute report found that nearly half of Gen Z investors in the United States named social media as a top source for learning about investing. The quality of what is available there varies enormously. Some creators provide balanced, well-considered financial commentary. Others are promoting products for payment, amplifying trending narratives, or optimising for engagement in ways that prioritise novelty over soundness.

The CFA Institute describes the evolving role of the adviser not as a gatekeeper of information but as a curator, validator and translator of an increasingly crowded digital landscape. That framing feels right. The value is not in controlling what clients read but in helping them develop the judgement to evaluate it.

Human advisers remain the most trusted source

Despite the breadth of information sources available to younger investors, the research is clear on one point: human financial advisers remain the single most trusted source of investment guidance across all generations, including Gen Z and millennials.

This is not a trivial finding. Trust is hard to earn in a world where financial content is available from a thousand sources at no cost. The fact that professional advisers retain it despite the competition from free digital content reflects something real: the value of contextualised, personalised, accountable guidance that takes a whole financial picture into account cannot easily be replicated by an algorithm or a social media post.

The confidence data makes the case

Perhaps the most direct evidence for the value professional guidance provides comes from a straightforward comparison in the CFA Institute data. Among Gen Z and millennial respondents:

• 75% of those using both a human adviser and a robo-advisory service reported being very or extremely confident in reaching their financial goals
• 71% of those using a human adviser only said the same
• 69% of those using a robo-adviser only reported similar confidence
• 60% of those with no form of professional guidance reported the same level of confidence

Confidence is not the same as outcomes, and correlation does not establish causation. But a 15-percentage-point gap between advised and unadvised investors' confidence in their own financial futures is a meaningful signal. It suggests that professional guidance provides not just technical input but a psychological anchor, a sense that someone with expertise has reviewed the plan and that it is sound.

For younger investors who are navigating a complex information environment, managing behavioural risks they may not fully recognise, and building wealth during a period of significant market uncertainty, that anchor has genuine value.

What good behavioural coaching looks like

The CFA Institute research identifies several practical ways advisers can add value specifically on the behavioural dimension. The common thread is that the adviser's role goes beyond portfolio construction and extends to helping clients make better decisions under conditions of uncertainty and emotion.

That means having explicit conversations about FOMO before a trending asset becomes a crisis point, not after. It means building a framework for evaluating new investment ideas that connects them to goals and risk tolerance, rather than momentum. It means creating conditions where clients feel comfortable sharing the impulses they have rather than only the decisions they have made, so that a professional perspective can be part of the process rather than a retrospective review.

None of this requires treating clients as irrational or incapable. It requires treating them as human, which is to say, as subject to the same cognitive patterns that affect every investor, and offering the structure and perspective that helps those patterns produce better outcomes over time.

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