In May of 2022 ASIC announced its crackdown on ‘Finfluencers‘ across Australia. The rise of finfluencers has been noted by many regulatory bodies as a potential risk to the financial services industry. According to a report by Ernst & Young, the number of social media influencers who focus on finance has grown significantly in recent years, and the average size of their following has also increased. The report notes that “these influencers may have a significant impact on consumer behavior and investment decisions.”
This is no small undertaking and something that ASIC will continue to pursue and build on given the size of this market. Social media has become a hive of Finfluencer activity with many pump and dump’s, scams and shill coins pushed by people with large audiences. An advocate online to address this issue has been Coffeezilla who has posted a series of scathing exposes on the dangers within this space and how Finfluencers have fleeced consumers for millions and possibly billions.
One of the main risks associated with finfluencers is that they may not be subject to the same regulations as licensed financial advisers. This means that they may be able to provide misleading or inaccurate information without facing the same consequences as licensed professionals. In a survey conducted by the Financial Conduct Authority (FCA) in the UK, it was found that 41% of consumers who had used an investment-related social media post had later regretted it.
For companies operating in the financial services industry, engaging with finfluencers can also pose regulatory risks. In Australia, the Australian Securities and Investments Commission (ASIC) has warned company directors to be cautious when engaging with finfluencers and to ensure that any collaborations or endorsements are conducted in a transparent and compliant manner.
The use of finfluencers in the financial services industry has also prompted calls for increased regulation. In the UK, the FCA has proposed new rules that would require social media influencers to disclose when they are being paid to promote financial products.
It is important for individuals to carefully consider the advice and information provided by finfluencers, and to do their own research before making any investment decisions. While finfluencers can be a valuable source of information and inspiration, it is essential to approach their content with a critical eye and to seek advice from licensed financial professionals when necessary.
The rise of finfluencers has highlighted potential risks to the financial services industry, including regulatory risks and the potential for misleading or inaccurate information to be disseminated. Companies and individuals alike should be aware of these risks and take steps to ensure that any engagement with finfluencers is conducted in a transparent and compliant manner.
