Finfluencer usage drops on back of ASIC crackdown

finfluencers social media HSBC financial advice AFSL

19 September 2023
| By Laura Dew |
image
image
expand image

Good news for financial advisers, the number of people turning to social media and finfluencers has decreased in the past year, according to HSBC.

The bank’s Investor Insight study of over 1,000 Australian investors found the number of people seeking investment advice from social media has fallen from 19 per cent last year to 13 per cent. 

This is particularly dramatic for investors in the Gen Z demographic, where it fell by 45 per cent from 37 per cent in 2022 to 20 per cent this year.

For millennials, it has fallen from 26 per cent to 19 per cent. 

The most popular sources of investment information are market research/industry reports at 36 per cent, company reports at 33 per cent and financial advisers at 31 per cent. 

There has been a recent crackdown on finfluencers, with ASIC stating last year that finfluencers now need to have an Australian Financial Services licence (AFSL) if they want to carry on a business providing financial advice.

“If you carry on a business of providing financial services, you must hold an AFS licence (unless you are exempt or are authorised to provide those services as a representative of another person who holds an AFS licence). Otherwise, you may be in breach of the licensing requirements under the law,” it said in a 2022 update.

ASIC also has notes for firms that use finfluencers, reminding them to do their due diligence on the individuals, put in place appropriate risk management systems, have sufficient compliance resources to monitor the finfluencer, and ensure they only promote products to the firm’s target market as laid out in the target market determination.

ASIC has also taken legal action against finfluencer Gabriel Govinda for market manipulation and finfluencer conduct, who was sentenced to two and half years’ imprisonment, and against Tyson Scholz for providing financial advice without a licence. 

Between September 2014 to July 2015, Govinda used 13 different share trading accounts, held in the names of friends and relatives, to manipulate the share price of 20 different listed stocks.

He also illegally disseminated information about his wash trades and dummy bids on HotCopper. He was seeking to increase (or pump) the share price, then selling (or dumping) the listed stocks at a higher price.

Meanwhile, Scholz received a permanent injunction from the Federal Court for offering paying subscribers various levels of share trading training.

A report at the end of March 2023 from the International Organisation of Securities Commissions (IOSCO) titled, Retail Market Conduct Task Force, called for greater international collaboration to tackle finfluencing.

It noted inappropriate online marketing and finfluencer activity exacerbated retail conduct issues and vulnerabilities. They were also identified as a “driving force” behind crypto and tech-based scams.

 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.
 

Recommended for you

 

MARKET INSIGHTS

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

adviser losses will be less severe in 2024, yes because there are next to none left. ...

2 days 3 hours ago
JOHN GILLIES

What does he do after three years???.He sits FEW EXAMS GETS THEM RIGHT ONCE and he can apply again promising to be a go...

3 days 22 hours ago
Ross Smith

I have been making this advocation for more than 10 years, that banning a financial adviser like this is hopeless like a...

3 days 22 hours ago

AustralianSuper and Australian Retirement Trust have posted the financial results for the 2022–23 financial year for their combined 5.3 million members....

10 months 2 weeks ago

A $34 billion fund has come out on top with a 13.3 per cent return in the last 12 months, beating out mega funds like Australian Retirement Trust and Aware Super. ...

10 months 1 week ago

The verdict in the class action case against AMP Financial Planning has been delivered in the Federal Court by Justice Moshinsky....

10 months 3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND