Thursday 14th April 2022
Financial Planning Association backs finfluencer crackdown
ASIC’s recent crackdown on “finfluencers” spruiking online financial advice through social media channels without proper licensin, has been welcomed by the Financial Planning Association of Australia (FPA). ASIC says “unlicensed finfluencers could face five years’ jail time or fines of more than $1 million if they talk about stocks, investment funds or financial products.”
The newly appointed head of the FPA, Sarah Abood, was concerned about the growing number of unlicensed finfluencers issuing financial advice to unsuspecting customers and putting them at risk. Customers acting on advice from an unlicensed finfluencer are essentially not protected by ASIC if things go wrong.
She says, “ASIC’s actions to enforce the law are very important, showing that the risks of online discussion about financial products and services are being taken more seriously.”
There seems to be a double standard when giving financial advice. Unlicensed finfluencers have been giving financial advice on social media to inexperienced investors for almost two years. However, financial planners seem to be treated differently. They are subject to meticulous regulations and ever-increasing compliance procedures so that the consumer is protected and there is confidence in the advice they have received.
The Banking Royal Commission saw financial planners undergo an examination and added regulatory compliance. It’s also seen many in the industry, pack up and leave.
Abood does, however, provide some guidance for finfluencers, saying their skills could play an important role in “improving financial literacy and confidence among consumers, and they were often very effective at providing that information in an engaging way online.”
The danger is that finfluencers could now switch to cryptocurrency. This is an area that has no protections: ASIC is not able to regulate crypto assets as they are not deemed to be financial products.
This is the reason why ASIC is trying to sway finfluencers towards “regtech” – regulatory technology ensures that companies are more effective in reaching regulatory compliance. Regtech helps minimise the risk of human error by automating the processes.
In this context, ASIC suggested a refocus on going down the regtech path where it could facilitate online discussions about financial products and services, replacing risky unregulated finfluencers. Regtech could solve the problem faced by retail investors seeking financial advice online. ASIC Commissioner Cathie Armour said, “Regtech companies could adapt their existing financial advice solutions to help social media users discuss financial matters.”
Social media users can check if a social media financial influencer is licensed to give financial advice by typing the name of the finfluencer into ASIC’s financial advice register.
Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.
