ANZ Finance blog | Are Finfluencers Finished?| McGraw Hill ANZ

FinTok, FinTok, FinTok… Are Finfluencers Finished?

Published 29 April 2022

By Dr Peter J Phillips, Associate Professor (Finance & Banking) University of Southern Queensland

Are Finfluencers Finished? -- McGraw Hill ANZ Finance Blog

People have made a lot of money as influencers. They could be fashion influencers. Food influencers. Fitness influencers. Pet influencers. You name it. But just because you post tips about dog ownership on your Facebook page doesn’t make you an influencer. CNBC reports that you probably need at least 1,000 followers and around 24 million annual views to generate serious income (about $100,000) and to consider yourself a bona fide influencer.

Not surprisingly, people have become finance and investment influencers… Finfluencers. Around the world, people have made good money doing this. Most of the money comes from advertising. This might be from unrelated, non-finance, products. But it might also come from financial products. And these advertised products might have (or appear to have) the endorsement of the finfluencer. That is, they might be paid product placements. The ecosystem of finfluencers is a diverse one. Pick any five at random and you might find they share very little in common with each other.

"The Australian Securities and Investment Commission (ASIC) released new guidelines that say that people who offer financial advice online, including finance influencers, could be in violation of Australian law."

Eventually, this industry was going to attract regulatory attention. And now it has. The Australian Securities and Investment Commission (ASIC) released new guidelines that say that people who offer financial advice online, including finance influencers, could be in violation of Australian law. Specifically, they could be charged with carrying on a financial services business without an AFS (Australian financial services) licence. This is a violation of the Corporations Act 2001 and they could face fines or even jail time. Some people view this as the beginning of the end for “finfluencers” in Australia.

There’s a lot more to the story but a few interesting details emerge once you do some investigation. First, financial advice doesn’t necessarily involve explicitly recommending a stock, managed fund, or financial product. Some finfluencers talk about their own investment decisions. This week I’m doing this. Last week I sold that. This could be interpreted as financial advice if it encourages people to make a financial decision.

"A finfluencer might perceive themselves as a news provider rather than an advisor."

Second, encouraging people to move into or out of broad asset classes (e.g., shares in general or managed funds in general or cash in general) may also constitute financial advice. This can become tricky. A finfluencer might perceive themselves as a news provider rather than an advisor. Obviously, talking about the ups and downs in the markets is permissible and exploring the underlying forces is too. But the finfluencer must be careful not to recommend that followers take a financial decision based on what has been discussed.

Third, finfluencers must not engage in “dealing by arranging”. That’s something many people have probably never heard of! This can occur if the finfluencer is paid by a licensed financial services provider to provide a unique link on their site which is then promoted to followers. If this facilitates a financial transaction, it can be dealing by arranging.

All this seems to make it quite difficult for unlicensed finfluencers to run their sites. However, there are a couple of exceptions, and these might provide openings that allow finfluencers to continue operating, with some adjustments.

"Unfortunately, most finfluencers will have some cleaning up to do if they want to stay in business because ASIC has made it clear that past posts count."

First, financial advice that doesn’t involve financial products does not require a licence. You can give household savings tips or budgeting tips. Second, you can provide news or information about finance and financial products if it does not convey a recommendation. You can explain what the share market is or what ETFs are but you can’t influence people to buy or sell shares or ETFs. You could certainly explain the finer points of portfolio theory and the Capital Asset Pricing Model. Unfortunately, most finfluencers will have some cleaning up to do if they want to stay in business because ASIC has made it clear that past posts count.

Failing this, finfluencers could switch from talking about shares and managed funds to talking about property and crypto. You can tell people to buy as much Bitcoin as you like. Or investment properties. Neither property nor crypto are covered under ASIC’s guidelines. For now.

Discussion Question

Debate the place of finfluencers in the Australian financial services industry.

Further Reading

The regulation of financial markets is explored in various parts of the text. ASIC’s role in regulating the equity markets is introduced in Chapter 4 of the text.