FPA backs ASIC’s scrutiny of finfluencers

The Financial Planning Association of Australia (FPA) CEO says it is encouraging to see ASIC take action on the risks posed by social media influencers – or finfuencers – and what is legally allowed when discussing financial products and services online.

Last month, ASIC released Information sheet 269 to provide clarity on how the law applies to social media influencers and the licensees who use them.

The new guidance outlined activities where influencers may contravene the law if they are unaware of their legal requirements, considerations they should take, and also guidance for licensees who are engaging with influencers, with ASIC warning: “If we see harm occurring, we will take action to enforce the law.”

As noted by the corporate regulator, “misleading and deceptive conduct” identified would amount to a criminal offence.

“ASIC is reminding finfluencers that the law does apply to them and warning them that ASIC will take legal action if necessary,” FPA CEO Sarah Abood said this week.

“Financial planners are subject to a high degree of oversight and regulation, and consumers can have confidence in the advice they receive from a professionally qualified and registered financial planner. None of these protections apply where finfluencers are concerned.

“Finfluencers can definitely play a role in improving financial literacy and confidence among consumers, and they are often very effective at providing that information in an engaging way online

“However they are not legally able to give personal or general advice on financial products, and anyone acting on a recommendation from this source is essentially on their own if things go wrong.”

Ms Abood reiterated that anyone seeking advice should do so through “qualified, professional financial planners who are complying with a code of ethics to provide advice in your best interests”.

It comes after ASIC commissioner Cathie Armour suggested that regtech companies could facilitate online discussions about financial products and services, replacing unregulated finfluencers.

Speaking at the annual Accelerate RegTech 2022 event last week, Ms Armour said: “Recognition of the importance of consumer protection in financial services has meant that financial advice is specifically regulated.

“So, accepting that the use of technology has the potential to improve financial inclusion and develop people’s financial capabilities, how can we best ensure that these services are effectively provided in compliance with our laws?

“It strikes me that this is an area where regtech has a real place.”

Dr Angel Zhong - who is a senior lecturer in finance in the school of economics, finance and marketing at RMIT University - also applauded the move by ASIC, after a research by the university found that financial information consumed online influenced investment decisions.

“Unverified investment advice is no different to fake news, which is frequently flagged by social media platforms that urge viewers to read with caution,” Dr Zhong said.

“Newbie investors are particularly susceptible to receiving dodgy financial advice, as the internet replaces traditional outlets like accredited financial advisers."

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.