The information sheet by ASIC is a wake-up call for finfluencers, who have been making a huge amount of money from content sharing and promoting affiliated products.
The information sheet formally warns finfluencers that ASIC is monitoring their online activities and reiterates the licensing requirement in the context of finfluencers.
It provides specific case studies to explain the types of actions by finfluencers, if unlicensed, constitute breaches of the Corporations Act 2001.
In particular, finfluencers who receive payments or benefits by recommending specific investment products and services are likely to be providing financial product advice.
Finfluencers who receive payments for promoting financial products using affiliated links to prompt followers to buy financial products and services are likely to be dealing by arranging, which can only be conducted by licensed individuals.
The information sheet also clarifies how statements made by finfluencers can be deemed as misleading, such as making a prediction without reasonable grounds and fact checking.
While the information sheet is useful from the perspective of the providers of content — the finfluencers, ASIC should also actively promote the information among the viewers of the content, the followers of finfluencers.
Unverified investment advice is no different to fake news, which is frequently flagged by social media platforms that urge viewers to read with caution.
Newbie investors are particularly susceptible to receiving dodgy financial advice, as the internet replaces traditional outlets like accredited financial advisors.
With the goal of protecting the financial wellbeing of investors, especially the young and inexperienced ones, ASIC should consider conveying the messages to young investors who rely heavily on finfluencers. And it is important to do so in a fun and engaging way by using social media, just as the finfluencers attract their large audiences.
At the meantime, it is worth considering why young investors turn to finfluencers in the first place. The problem probably relates to the costs of obtaining licensed and high-quality financial advice.
Author: Dr Angel Zhong - Deputy Dean, Research and Innovation and Associate Professor in Finance, at RMITs College of Business and Law.