Picture this: You’re in a meeting with a couple of long-term clients; a pair in their mid-60s.
You’re running through the strategy you’ve formulated, when one of them pulls out their phone and shows you a video. It’s a link their son has sent them showing a finfluencer on TikTok with some very different ideas about wealth accumulation. The pair wants to know whether it stacks up.
Assuming what the finfluencer is saying is general in nature and compliant, what do you do next?
It’s a quandary that is emerging in the financial advice market, without a straightforward answer. On one hand, advisers are paid as professionals for their training, education, strategy, and personalised advice. On the other hand, the “finfluenced” market could present opportunities as a future client base, with different questions and interests.
What is a finfluencer?
A social media finfluencer is someone who generates finance-related content that influences others on platforms such as TikTok, Instagram and Facebook. Some finfluencers are licensed advisers, while others are consumers.
For example, 25-year-old Queenie Tan – known under the handle investwithqueenie – has more than 21,000 Instagram followers and 61,000 TikTok followers. She shares tips on a range of money topics, including home ownership, budgeting and retail investing.
It’s not uncommon for finfluencers to share personal stories of how they have generated wealth and both investors and companies are paying attention. Recently, a millennial conference, MarketLit, featured a program of both finfluencers and listed companies vying for insights into how they invest.
Words of warning
Although the new breed of influencer is creating excitement for some, it’s also creating headaches for others.
While some finfluencers steer well away from recommendations, questions have been repeatedly raised about how finfluencers fit in the regulated marketplace, particularly when it comes to products.
In the past week, social media platform TikTok has banned the promotion of financial products on its platform, including cryptocurrency.
RMIT senior lecturer Dr Angel Zhong has long been calling for greater regulation of finfluencers and warnings to people on social media. She has warned about videos that encourage people to borrow money to invest in cryptocurrency.
“It is important that proper measures are in place to monitor and even for governing bodies to step in given the prevalence of social media in investment,” she said.
ASIC has indicated it’s looking into the behaviour of finfluencers, with deputy chair Joe Longo describing it as “an area of great concern”.
Commissioner Danielle Press said if it swerves into the realm of financial advice, it becomes problematic.
“It really comes down a question of whether or not it is financial advice,” she said. “If it is, it's probably unlicensed. That is illegal activity, and we would be very interested in that illegal activity”.
A gateway to a new generation
However, others take a different view of the matter.
In a recent speech to the Stockbrokers and Financial Advisors Association, Financial Services, Superannuation and Digital Economy Minister Jane Hume described finfluencers as the latest iteration in a long line of consumers sharing views about financial markets, not unlike “taxi drivers… giving stock tips”.
“The TikTok influencer spruiking Nokia is not that different to the bloke down at the pub who wants to tell you all about the really great company he just invested in – but with a much louder voice.”
Ms Hume also said they could be a gateway to better engagement for younger generations.
“A TikTok influencer is Generation Z’s Paul Clitheroe or Scott Pape,” she said.
So, what should an adviser do? While some businesses are keeping an eye on finfluencers and their potential to unlock new markets, others are happily disregarding them, citing too few hours in the day. It may go without saying, but anyone delivering unlicensed financial advice via social media should be immediately reported to ASIC.