Why (licensed) finfluencers could be the missing piece in the advice puzzle

Many in the advice space have voiced long-held scepticism about the rise of the finance influencer. However, as more finfluencers seek to be licensed to provide general advice on social media, they argue that they play a complementary role in the advice landscape. 

Since March 2022, the Australian Securities and Investments Commission (ASIC) said it had identified at least 14 finfluencers who had gained the relevant authorisations by obtaining either their own AFS licence or status as an authorised representative of an Australian financial services licensee or Australian credit licensee.

Natasha Etschmann aka Tash Invests was licensed last year by dealer group Guideway Financial Services, an AFS licensee and Australian credit licensee and, with this license, she was authorised to provide general advice to her more than 150,000 followers on TikTok and Instagram. 

“My role in the space is to generally talk about [finances] and get people interested in it. I give them that base level of knowledge so they can go and get advice in the future. A lot of people don’t want to see an adviser when they don’t even know what an exchange-traded fund (ETF) is,” she said.

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Guideway chief executive, Alex Aracas, said the firm had begun exploring the idea of influencers almost two years ago and had been inspired to contact Etschmann as it felt her content was a way to close the advice gap and embrace social media within the business.

“Consumers are actually self-selecting to receive advice through the finfluencer channel. We were interested in this and investigated by watching a number of such videos [on social media],” he said.

“We were really impressed with two things. One, the quality of content from some of the top operators and two, the engagement, questions, and commentary subsequent to those videos.

“Having licensed one finfluencer and [now] talking to others, more and more we’re seeing the advice gap as being one of financial literacy and education, and as well as complementary to personal advice.”

Of her large audience, Etschmann estimated that a large portion were 25–35-year-olds, leaning over 65 per cent female on both platforms, a demographic who is less likely to be currently working with a financial adviser.

“When I’ve run a poll before, they seem to have a higher-than-average income, but that makes sense because my content is mostly investments-focused and you need that surplus income to invest,” she added. 

According to Etschmann, her work helps everyday Australians understand what their financial options are and dispels the myth that they had to be stereotypically rich in order to invest. 

“There’s so much distrust in the financial services industry, and if people don’t know the financial basics, they don’t feel confident going to an adviser and knowing they’re not getting ripped off,” she told Money Management. 

“A lot of the questions I get are around basic stuff, like how to pick a broker or how to buy an ETF. It’s foundational knowledge that people can’t get a real answer on.”

She saw finfluencers’ content as a stepping stone for investors to enter the financial advice space, not as an alternative to an adviser, stating: “I can’t give personal advice at all and I’m never going to know someone’s financial situation. I provide a general overview, so I’m not the solution for everyone.”

Working with Guideway

Etschmann began the process of getting licensed in 2022, shortly after ASIC announced it would be monitoring online financial discussions. 

She said Guideway was largely able to walk her through the process, which included a number of Kaplan courses to meet necessary education standards. She was charged a nominal annual fee for the licensing and, as outlined in her publicly available financial services guide, she now holds an approved product list on what she could discuss as a finfluencer. 

“I’m licensed to talk about ETFs and I’m in the process of completing a course to talk about super in the future,” she explained. 

However, having gone through the process, she felt she was one of the lucky ones because ASIC had not shared a “clear pathway” to get licensed. 

“I was in a really lucky position to have a big-enough following and to be making some money out of this to make it viable to get licensed [by Guideway],” she said.

“It’s really valuable to have people sharing their opinions in this space, but if you haven’t reached that level already, it’s very hard to get licensed, as someone who doesn’t have a financial services background.”

Currently, there is no legal definition of a financial influencer and the penalties for unlicensed financial advice are fines of $1 million or more or up to five years’ jail.

However, Etschmann questioned if the regulator is clear enough on whom this applied to.

She added: “When ASIC began cracking down on finfluencers, they were more focused on people sharing investing information and advice, but there was no clear line between, say, a money coach and a person offering general advice?”

ASIC had already secured a significant sentence against unlicensed individuals like Gabriel Govinda, known online as Fibonarchery, for market manipulation conducted on online forum HotCopper and has ongoing proceedings against Tyson Scholz for allegedly providing unlicensed financial services online under the moniker ASX Wolf. 

An ASIC representative told Money Management: “Finfluencer misconduct remains an enforcement priority for ASIC. We continue to monitor this space and have made it clear previously that we will take enforcement action when it was in the public interest to do [so].

“Anyone seeking investment advice should act with care, do their own research and define their own investment objectives. Relying on social media for investment information is risky — information can be inaccurate and misleading.” 

Appealing to a younger generation

Recently, Insignia Financial’s CEO, Renato Mota, stated that, although finfluencers tend to “swim outside the safety flags”, they signal an unmet demand from a younger generation seeking advice and information.

“There’s a demand, particularly from a younger generation with a desire to consume information, empower themselves with knowledge through social media, through different means that may not be my first port of call or an older population, but it plays an important role,” he said at the firm’s thought leadership and virtual adviser education program, Elevate Digital 2023.

“To the extent that we’re all playing by the same set of rules, I think there’s a fantastic opportunity to embrace social media to engage a younger generation — potentially in advice-like services earlier in their lives where they can have greater influence on their outcomes through life.”

According to Guideway’s Aracas, a lot of the hesitance around finfluencers and social media come from its sheer newness in the market.

“There’s always resistance to things you don’t really understand, it was the case with me and other members of our team, but [finfluencers] are very much complementary,” he said.

“Am I going to be the person to star in the video? Do I have the time to put together this sort of content? The answer is probably no. I might be an expert in providing personal advice but not necessarily an expert in providing financial education to the masses.”

In 2022, YouGov research found that more than a third of Australians (35 per cent) who currently used an investing app said they turned to social media, finfluencers, and online forums to learn about investing. 

Aracas stated that failing to recognise social media as an emerging channel to communicate with clients could mean missed opportunities for advisers. 

“ASIC is bringing finfluencers under the licensing regime, which I think is a critical initiative and the first step towards providing consumers with a safe space to consume information,” Aracas said.

“I would say to advisers, embrace social media and see what benefits it can provide your business. We see a lot of benefits within our own network in terms of referral and additional engagement. As assets transition from older Australians to the next generation, having a presence in this area is going to really support the business.”