ASIC Monitors Social Media Influencers Giving Financial Advice

In Australia, where the influencer culture is thriving, it’s important to understand the reason behind using social media as a platform for giving financial advice, while being aware of the pitfalls.

With the rise of influencers, who have gained significant followings, financial advice is now being disseminated through social media channels. These platforms have become powerful tools for communication and information sharing — and are where “finfluencers” are born.

ASIC’s Warning

As the country’s corporate regulator, ASIC is responsible for enforcing laws and regulations related to financial services, including monitoring and taking action against those who provide illegal or misleading advice. And with the rise of finfluencers, the watchdog is taking the offensive.

In 2022, ASIC executive director for market supervision Greg Yanco warned that any finfluencer found guilty of operating without a financial services licence will face up to five years’ jail time and at least $1m in fines. He stated that social media users dispensing financial advice need to settle legal issues first before attempting to post relevant content.

The warning came down after ASIC launched a Federal Court injunction in late 2021 against Tyson Scholz for sharing advice about trading in the ASX under the moniker “ASX Wolf”. The Gold Coast native was found guilty in April 2023 of running a paid advisory programme and banned from the practice under threat of imprisonment.

Momentum Media’s Rhea Nath said ASIC’s warning worked, with 14 finfluencers securing their AFS licences or were granted permits from an Australian financial services licensee or credit licensee. Meanwhile, TikTok also took action by banning paid content related to crypto and finance issues.

Financial Advice on Social Media

Social media platforms offer unparalleled accessibility and reach, making them an attractive medium for finance influencers. Through platforms like Instagram, YouTube, and TikTok, influencers can connect with a broad audience, including millennials and Gen Z, who are active users of these platforms. This allows influencers to reach individuals who may not actively seek financial advice through traditional channels.

These platforms provide engaging and interactive content. Finance influencers can use visuals, videos, and storytelling techniques to simplify complex financial concepts, making them more accessible and relatable to their audience.

Interactive elements like polls, Q&A sessions, and live chats encourage active participation, fostering a sense of community and enhancing the learning experience.

Building Trust and Authenticity

A successful finance influencer establishes trust and authenticity with their audience. They can cultivate a sense of credibility and relatability by sharing personal experiences, providing transparent insights, and showcasing expertise.

Traditional financial advice channels can be intimidating and often perceived as impersonal. Finance influencers have the potential to diversify financial education by presenting information in a more engaging and relatable manner.

This humanises financial advice and helps followers connect with the influencer on a more personal level, enhancing trust in their guidance.

Pitfalls of Financial Advice on Social Media

The rise of finance influencers on social media offers both opportunities and challenges for individuals seeking financial advice. But caution must be exercised.

Lack of Regulation and Accountability

One of the primary concerns surrounding finance influencers on social media is the lack of regulation and accountability. Unlike licensed financial advisors, influencers are not subject to the same regulatory requirements. This raises concerns about the accuracy and reliability of the financial advice being disseminated, as well as the potential for conflicts of interest.

It is essential for individuals seeking financial guidance to exercise caution and verify the credentials of influencers.

Oversimplification and Misrepresentation

Due to the constraints of social media platforms, finance influencers may oversimplify complex financial concepts to fit within character limits or time constraints. This can lead to a lack of nuance and a misrepresentation of the realities of financial decision-making.

Followers should recognise the limitations of social media content and seek additional resources or professional advice to gain a comprehensive understanding of their financial situation.

Influencer Bias and Product Endorsements

Many finance influencers monetise their social media presence through brand partnerships and sponsored content. While these collaborations can provide valuable insights and opportunities, they also introduce the potential for biassed recommendations and product endorsements.

The audience should be mindful of influencers who prioritise commercial interests over the best interests of their followers and exercise sound judgement when considering financial products or services.

Individualised Advice and Suitability

Financial advice is not one-size-fits-all, as each individual’s financial situation and goals are unique. Social media content may not address the specific circumstances of followers, leading to inappropriate or unsuitable recommendations.

It is crucial for individuals to recognise the limitations of generalised advice and consult with licensed professionals who can provide tailored guidance based on their individual needs.

UBUDGET, provided by UBOMI, empowers users to manage their finances by setting and monitoring budgets, thus giving them increased control. This is a formidable resource that can assist in accomplishing personal targets.

If you liked our “ASIC Monitors Social Media Influencers Giving Financial Advice” and find it useful, check our blogs regularly for more information to get updates on UBOMI’s money planner app.

DISCLAIMER:  This article is for informational purposes only. UBOMI has no relations with any company or government office mentioned in the article.