A new survey from VanEck has revealed that only 24 per cent of investors are in favour of finfluencers being allowed to recommend financial products, with over seven in 10 investors said to be shunning social media to perform investment research.
According to Arian Neiron, CEO and managing director of VanEck Asia-Pacific, investors want to see finfluencers with an AFSL.
“They want assurance that product recommendations are coming from experts that have genuine understanding of asset classes, markets, economic drivers and that products recommended need to address the personal objectives of the investor,” Mr Neiron said.
Moreover, the survey showed that the most popular finfluencers were the ones that were also financial advisers. In fact, VanEck revealed that an increasing number of advisers are moving onto social platforms to engage their clients and to help engage the younger generation.
“We believe there is an important role social media plays in getting people interested in investing and increasing financial literacy,” Mr Neiron said.
“Investing and wealth-building strategies shouldn’t be gate-kept and we should be encouraging people to learn more. However, the investment landscape is complex and personal advice should come from verified experts.”
Moreover, VanEck found that the cohort of investors that did use social media to learn about investing and would like finfluencers to recommend products was spread across all age groups fairly evenly but the vast majority (69 per cent) had an annual income of less than $150,000.
Among those using social media, Facebook and Reddit were the most popular platforms.
“Finfluencers evolving their value proposition within the existing regulatory framework can only be a good thing for both investors and creators. It will be interesting to watch this space as AI, such as ChatGPT, advances,” Mr Neiron concluded.
Late last year, the Federal Court found social media ‘finfluencer’ Tyson Robert Scholz contravened section 911A of the Corporations Act by carrying on a financial service business (between March 2020 and November 2021) without an Australian financial services licence.
Reacting to the court’s decision, Angel Zhong, a senior lecturer at RMIT University, applauded the outcome.
Speaking to ifa, Ms Zhong said: “First, it reinforces ASIC’s regulatory guidance in April this year that is known to warn finfluencers who provide unlicensed financial advice on social media”.
“When a finfluencer recommends a specific financial product or asset, it is very likely that this will influence the investment decision of his/her followers,” she explained.
Second, Ms Zhong said, “the fact that finfluencers can impact followers’ financial decisions highlights that Australians need quality and affordable financial advice”.
“Hungry for financial advice, investors who can’t afford formal financial advice have to resort to unlicensed finfluencers. It is imperative to build a robust and effective financial advice system in Australia to safeguard the financial wellbeing of our society,” Ms Zhong opined.
