a day ago
The problem with taking advice from ‘finfluencers'
For better or worse, now when people go looking for life advice or want to find answers to burning questions, the place we increasingly turn to is social media. And sure, there are a lot of areas in our lives where this can be great. Suggestions on how to use up half a can of chickpeas or learning how to braid your hair is one thing. But when it comes to things like our health and finances, the risks associated with getting advice from unqualified influencers are exponentially higher.
That's one of the reasons that I was happy to see that the Australian Securities and Investments Commissions recently took part in a global crackdown on financial influencers, also known as 'finfluencers', along with regulators from the United Kingdom, Italy, Hong Kong, Canada and the United Arab Emirates.
Following the crackdown, ASIC commissioner Alan Kirkland explained: 'It's important that consumers separate fun from fact when it comes to influencer content. Popularity doesn't equal credibility.' In other words, a finfluencer might have 100,000 people eager to listen to what they have to say, but that doesn't mean they have the qualifications, expertise or a legal right to be saying it in the first place.
In the UK alone, the regulator issued 650 requests for content to be removed from social media, 50 takedown requests to websites being operated by influencers, and seven cease and desist letters. The regulators also invited four influencers in for interviews, and made three arrests.
In Australia, though, the fallout was much smaller, with ASIC issuing just 18 warning notices to financial influencers suspected of providing unlicensed financial advice and/or unlawfully spruiking high-risk financial products.
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As tempting as it might be to think that our markedly smaller numbers are a sign of Australian finfluencers being better, more honest people than those in other nations, that's not quite it. The main reason for our A+ performance is a thing called INFO 269, which are guidelines ASIC issued in 2022 specifically outlining the rules and regulations for social media influencers offering financial advice. In addition to breaking down the legal standards influencers are required to meet before discussing or promoting stocks, financial products or investment funds, the guidelines also make the consequences of breaking any rules crystal clear: up to five years in jail, or fines of over $1 million.
These threats aren't idle, either. In 2021, ASIC successfully filed a lawsuit against Tyson Scholz, an Australian finfluencer who dubbed himself the 'ASX Wolf'. At the time, Scholz was offering stock tips via paid online subscriber groups to his Instagram followers, which sat at well over 100,000 people. At the time, though, Scholz did not hold a valid financial services licence, meaning his advice specifically on what stocks to buy was against the law. By 2023, he was facing bankruptcy over a $450,000 court-imposed debt from the regulator.
And it's not just finance influencers who are being closely watched and regulated, either. In 2022, the Therapeutic Goods Administration announced restrictions on how influencers post about products such as vitamins, protein powders, supplements, sunscreen, medical devices and medicines. These changes mean influencers must clearly disclose if they are in partnership with a brand, and they also cannot share their personal experience with therapeutic products.
