Rise of the ‘finfluencers’
ASIC warns against offering illegal online financial services.
Online influencers giving financial advice are saturating the digital world, blurring the lines between legitimate and fake financial content.
Coined as ‘finfluencers’, these content creators offer opinion-based information on investments, financial products and services, across platforms such as YouTube, Instagram and TikTok.
In Australia, offering financial services online without an Australian Financial Services licence is illegal and breaches the Corporations Act, 2001.
The Australian Securities and Investments Commission (ASIC) has responded to the growing trend with an information sheet offering scenarios, case studies and the consequences of sharing financial information online without a licence, delivered as a warning to finfluencers.
ASIC Commissioner Cathie Armour said it was crucial that influencers who discussed financial products and services online complied with the financial services laws.
“If they don’t they risk substantial penalties and put investors at risk,” Ms Armour said.
The Corporations Act imposes significant penalties for breaches, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.
The law prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services.
ASIC’s information sheet also warns of the risks and obligations facing AFS licensees who use influencers.
In 2021, the ASIC Young People and Money Survey found that 33% of 18 to 21-year-olds followed at least one financial influencer on social media.
The survey found a further 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer.
“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing,” Ms Armour said.
“If we see harm occurring, we will take action to enforce the law.”
Senior Lecturer in Finance in the School of Economics, Finance and Marketing at RMIT University Dr Angel Zhong supported ASIC’s step towards regulating finfluencer content.
She said the information sheet was a wake-up call for finfluencers who were profiting off affiliated financial products and the related advice.
“The information sheet formally warns finfluencers that ASIC is monitoring their online activities and reiterates the licensing requirement in the context of finfluencers,” Dr Zhong said.
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