ASICs publication released today was a welcomed move
In Australia, giving financial advice without a license is illegal but unlicensed influencers are giving financial advice on social media.
Following repeated calls that governing bodies like ASIC should be taking a harsher stance on finance influencers by stepping up monitoring and enforcement efforts last year, today ASIC has issued an information sheet for finfluencers.
Influencers are increasingly turning to online platforms like TikTok and YouTube to give financial advice, despite not being licensed to do so.
Dr Angel Zhong, a Senior Lecturer in Finance in the School of Economics at RMIT University said today’s publication from ASIC was a welcomed move.
“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,” she said
“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 (Corporations Act).
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 — I also suggest ASIC needs to be actively promoting the information among the viewers of the content, the followers of finfluencers.
Recent RMIT University research found financial information consumed online influenced investment decisions, a challenge to previous thinking that they merely justified people’s existing ideas.
“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 can consider conveying the messages to young investors who rely heavily on finfluencers.
ASIC will need to do this in a fun and engaging way by using social media, just as the finfluencers attract their large audiences.