ASIC's Finfluencer Crackdown Could Be Advisers' Big Opportunity

In the last few years, we’ve witnessed the meteoric rise of financial influencers – or ‘finfluencers’ – who have been credited with capturing the eyes and clicks of a new generation of investors.

In a relatively short period of time, these influencers have engaged millions of Australians, some of whom take action as a result. ARdata research shows as many as one in 20 consumers rely exclusively on social media for financial information.

Source: ARdata consumer survey 2022

The response to the finfluencer phenomenon has been mixed. While Financial Services Minister Jane Hume last year compared the influencers to “taxi drivers…giving stock tips”, the Australian Securities and Investments Commission (ASIC) has taken a dimmer view. Last month, the corporate watchdog updated its guidance and warned unlicensed influencers could face up to five years in prison or significant fines for breaking financial services laws.   

The ASIC information sheet warned influencers against giving product advice and unsubstantiated or misleading claims, such as ‘holding onto this share in the long term will generate significant returns and is just like depositing your money with a bank!’

The explainer has been welcomed as a consumer protection move. RMIT University senior finance lecturer Dr Angel Zhong stressed that young people, in particular, have been at risk of falling victim to advice disguised as general information.

“Unverified investment advice is no different to fake news, which is frequently flagged by social media platforms, which urge viewers to read with caution,” she said. “Newbie investors are particularly susceptible to dodgy financial advice, as the internet replaces traditional outlets like accredited financial advisers.”

Where does this leave advisers?

As licence holders, financial advisers were outside of the scope of ASIC’s warning shot, although licensees should keep in mind that the regulator did caution them to closely monitor influencers operating under their AFSL.

As finfluencers exit the social media market due to fear of jail time or fines, there could be a chance for licensed advisers who know their way around consumer laws to plug the gap. Advisers have the advantage of being able to differentiate between product and general advice, and they know disclosure obligations. Many also have a launch audience from their existing client base. We’ve already seen dozens of advisers lift their social media presence during the COVID-19 pandemic, but that trend could now escalate.

We know social media influencing doesn’t fit into every adviser’s value proposition, especially as advisers are becoming more stretched with compliance, education and business growth. That being said, more practices are starting to see its role in building new audiences, re-engaging clients and tapping into the generation that will inherit the biggest wealth transfer in our history. Food for thought.

Was this helpful content?Let others know - share and vote-up