ASIC issues warning to financial influencers

The Australian Securities and Investments Commission (ASIC) has sent out a stern warning to social media influencers who promote financial products and services online through their platforms.

This comes as no surprise after the corporate watchdog uncovered in a survey that 33% of 18-21 year old’s follow at least one financial influencer on social media and 64% of young people admit to having their financial behaviour influenced by these ‘finfluencers’.

ASIC commissioner Cathie Armour says the organisation is cracking down on these individuals.“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlinked advice or dealing.”

“It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk,” Ms Armour said.

Pandemic and uncertain economic times give rise to ‘finfluencers’

ASIC has been keeping an eye on certain financial influencers for a long time, with some expected to be earning hundreds of thousands to millions of dollars from sponsorships and or promotional deals.

The COVID-19 pandemic was found to cause a flourish in general and personal financial advice being sought after, according to ASIC chair Joseph Longo.

“We are making it clear to social media content creators and the public that there is a clear legal difference between advice and opinion,” he said.

With the rise in numbers of people seeking advice, it is not until now, in an attempt to cull the significant rise in finfluencers, that penalties of up to five years imprisonment or fines of $1 million or more have been set.

ASIC executive director of market supervision Greg Yanco says he expects the warning to result in a number of prominent ‘finfluencers’ making relevant changes to their content.

“Our concern is when that information turns to providing advice, and operating a business that is providing advice, without a license. If someone is providing advice, and they don’t have a license, we will be looking at taking enforcement action,” Mr Yanco said.

ASIC’s rules for influencers

Under the new law, only individuals who are registered with ASIC and hold a financial services license, or are authorised by a licensee, can provide advice.

The rules have been put in place with the intention to ensure all information being provided by the finfluencers is accurate and balanced, with minimal to no misleading or deceptive nature about it.

As a result of these laws, there is the potential for greater transparency between the influencers and their followers, with greater due diligence required and the need to disclose paid partnerships or sponsorships.

There is still an element of concern with how the finfluencers will be completely monitored.

Whilst the laws have been put in place, the influencers may be providing their advice through methods such as private messages (PM) or even short lived stories on social media platforms which only last a short time period.

Mr Yanco calls on consumers to be proactive and ensure they’re dealing with a licensed professional, with tip-offs from the public about unlicensed advisors encouraged.

ASIC urges Australians to do their research

ASIC are calling on Australians to be more cautious and do their own due diligence when it comes to looking for general financial advice.

Licensed professionals such as financial advisors or mortgage brokers are more reputable than these supposed financial influencers who speculate to earn millions on millions per year.

It is not all doom and gloom for financial influencers who act in good faith.

Mr Yanco says the simple solution is just to obtain a license to provide general financial advice, allowing them to freely provide information about financial products, without providing personal advice to clients.