Consumers need better protection from finfluencers
The regulator’s guidance on ‘finfluencers’ is welcome but more needs to be done to protect consumers, according to Stockspot.
Earlier this week, the Australian Securities and Investments Commission (ASIC) announced guidance regarding financial influencers and warnings for licensees who sought to use them.
However, Chris Brycki, chief executive of robo-adviser Stockspot, felt there was still areas where consumers were insufficiently protected.
He said: “This guidance provided by ASIC is welcome and much needed to protect consumers and provide clarity for finfluencers. We think this is an important step forward to promote transparency and remove conflicts of interest. Currently, it’s difficult for consumers to distinguish between what is a sponsored affiliate advertisement versus an unpaid review or testimonial.
“Finfluencers can provide some great money tips, for example around saving and budgeting. There are also areas where finfluencers can adversely impact consumer behaviour, such as market speculation and herd mentality, when recommending particular products.”
He highlighted three areas of particular concern; banning adviser finfluencer product commissions, licensing finfluencers who provided general advice about their investing experience and banning paid testimonials.
“At present, licensed financial advisers who are also finfluencers and promote an investment platform. They can receive a revenue share fee for each lead they generate without disclosing their commercial relationship with that platform. This needs to be banned as it doesn’t comply with the best interest duty and code of ethics that came out after the banking royal commission.
“A finfluencer should be licensed before publishing their portfolio or what financial products they are trading or investing in. Otherwise, by ‘design or effect’ (as highlighted by industry submissions to the SEC) there is a high chance the audience might mimic that investment strategy. Finfluencers start influencing a niche market, but eventually morph into large networks where they are able to influence investing decisions for vulnerable consumers.
“Finally, we believe a blanket ban on all paid testimonials is urgently needed. There should be no paid testimonials or financial product reviews where the finfluencer receives a commercial benefit from the financial product or service being reviewed. They should only disclose the information if it is from personal experience and they are not paid for the testimony.”
AUTHOR
Laura Dew
Recommended for you
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
As advisers seek greater insights into FSCP determinations, what are the various options considered by the panel and can a decision be appealed?
Amid the current financial adviser shortage, advice firm Link Wealth is looking to expand its financial literacy program for high school students across the country.
TAL Risk Academy has updated its range of ethics courses to help financial advisers meet their CPD requirements following adviser feedback, including interpreting FSCP determinations.
