Financial watchdog ASIC puts ‘finfluencers’ on notice
Young people are increasingly making investment decisions based on what they see on TikTok or YouTube, causing ASIC to intervene.
Nearly two thirds of young people following so-called ‘finfluencers’ on TikTok, YouTube and Instagram have changed their financial behaviours as a result, leading watchdog ASIC to issue a fresh warning on shonky financial advice delivered over social media.
Social media influencers spruiking financial services or products “risk substantial penalties and put investors at risk” if they don‘t comply with rules, financial services regulator ASIC warned on Monday.
Around a third of 18 to 21 year-olds follow at least one financial influencer on social media, ASIC said, while 64 per cent of young people reported changing at least one of their financial behaviours as a result of following a finfluencer.
The regulator has issued a new information sheet to influencers and financial firms using influencers on how the law applies to them.
“What we’ve found looking at finfluencers is some of them are crossing the line, they need to know that they need to be licensed effectively, and that they understand their obligation to declare conflicts of interest and are complying with their obligations more broadly,” ASIC’s executive director of markets and corporations Greg Yanco said.
“There are consequences of not listening to this, some of the finfluencers are thinking ‘this shouldn’t apply to me’, and we’re saying ’no, you need to engage with this information, and if you don’t we’ll take action’.”
ASIC commissioner Cathie Armour said the way investors access information is changing, and influencers who discuss financial products and services online must comply with the financial services laws.
“If they don’t, they risk substantial penalties and put investors at risk.”
Some ‘finfluencers’ have amassed hundreds of thousands of social media followers, with teens lapping up tips on making and saving money, and investing in crypto and NFTs. Reddit’s online ‘wallstreetbets’ community has 11.8m members and has caused ‘meme’ stocks like Gamestop to skyrocket over the past year.
Australian self-described finfluencer Glen James, who has tens of thousands of followers across his ‘My Millennial Money’ podcast and online advice community, welcomed the watchdog’s move and called for new laws to crack down on dodgy finfluencers.
“Finfluencers provide a net positive, it’s about young people to take action and take their financial lives seriously. But when finfluencers get a specific following, and are earning an income, they need to prove that they’re not being incentivised to push a certain product,” he said in an interview.
“A lot of time finluencers will post affiliated links, and the question is, are they licensed to give that advice? By definition, social media accounts with a big following do have influence.
“If a finfluencer has followers of say over 10,000 people and are generating revenue from their account, I believe there needs to be some kind of general advice type licensing so the population can be ensured those finfluencers have a general level of financial knowledge and understanding. At the end of the day if someone is generating revenue, they are operating a business.”
Fellow finfluencer Queenie Tan - who has almost 200,000 followers across Instagram and TikTok, said the new guidelines would be helpful for the nascent industry.
“We can now determine more clearly what is likely to be financial product advice and what is unlikely to be financial product advice - so that we can create content which adheres to the new guidelines and is factual, educational and balanced.”
Angel Zhong, an expert in ‘finfluencers’ and senior lecturer in finance in the School of Economics, Finance and Marketing at RMIT University, said too she was glad to see ASIC provide in what’s been a grey area.
“This information sheet lists what may constitute breaches of the law in finfluencers’ contents. In particular, it gives great examples of what might constitute as financial product advice that an unlicensed finfluencers should not provide,” she said.
“It has outlined issues to be considered for finfluencers, such as the requirement for AFS license and flagged relevant regulatory guidance.”
There is room for improvement, Dr Zhong said, particularly around providing more information specifically for the ‘Corona generation’ – first-time investors who joined the financial markets for the first time during the pandemic due to boredom at home.
“Investors need to be aware of when finfluencers may breach the law, when they can listen to finfluencers and for which specific issues they should not listen to finfluencers,” she said. “Furthermore, ASIC needs to communicate and reach young investors in a way that the finfluencers reach them, via social media in an interactive and engaging manner.”
ASIC’s move follows a separate crackdown by ACCC on social media influencers who fail to disclose they are being paid for promoting goods, fake online reviews and retailers who use false low stock warnings to drive digital sales.
“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing,” Ms Armour said.
“If we see harm occurring, we will take action to enforce the law.”
Additional reporting: Joseph Lam
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