If your social media feed is full of ‘finfluencers’ sharing their tips for investing in crypto or buying their first property before they hit 25, make sure you are aware of the full story behind the promises.
Financial influencers or ‘finfluencers’ range from entrepreneurs and ‘financial popstars’ to celebrities including actors, TV personalities, musicians, gamers, and elite sportspeople.
While they may be great at communicating about money or their own financial decisions, they could be straying outside the law by making recommendations.
And the Australian Securities and Investments Commission (ASIC) is concerned about the people who could be following more than just their feed.
According to a survey by ASIC, more than a third of young adults (18-21-year-olds) report following at least one finfluencer on social media.
And almost two thirds of them (64 per cent) who follow a ‘finfluencer’ have changed at least one of their financial behaviours as a result.
One 18-year-old woman reported that a YouTuber told her that ‘starting to save and learning the value of money young will make all the difference you need’. Members of Gen Z also reported turning to other sources for financial guidance.
About 80% of those surveyed felt comfortable talking with their parents or guardians about money and 77% said they would most like to learn about money from their parents or guardian.
They also look to employers, the education sector, financial institutions, and government for advice and guidance.
As someone already working with a financial adviser you are less likely to be drawn to finfluencers, however your family and friends might not be quite aware of the difference. For anyone looking to social media for financial guidance, here’s why you might want to be careful who you follow.
ASIC is cracking down on finfluencers who may be straying past regulatory boundaries by providing misleading or deceptive recommendations.
In March ASIC published an information sheet about discussing financial products and services online. It outlines how the financial services law applies to social media influencers and the Australian Financial Services licensees who use them.
The law prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services.
Discussing different investment products is fine if no specific recommendations are made. Talking about budgeting and other money saving tips won’t cause a problem.
But misleading information – such as possible returns from a product or class of products – is likely to attract the regulator’s scrutiny.
Those finfluencers who are making an income out of their social media channels may be required to get an Australian financial services licence.An influencer can be deemed to breach the misleading or deceptive provisions even if they aren’t licensed. The information sheet also suggests influencers need to do their due diligence on anyone who is paying them or providing them with payment in kind.
Likewise, Australian Financial Services Licensees using influencers were reminded they need to monitor their activities to ensure they are adhering to the law.
Those influencers who don’t comply with the law risk being hit with substantial penalties for putting investors at risk. The penalties can include up to five years jail for individuals and fines in the millions for corporations.
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