While guidance for advisers is welcome, the onus is also on the Government to educate consumers on how much weight they should give finfluencers.
Earlier this month, the Australian Securities and Investments Commission (ASIC) issued guidance for advisers and finfluencers on what was classed as financial product advice as well as what advisers needed to consider when working with finfluencers.
It also provided case studies which gave examples of what would class as misleading or financial product advice.
Licensees were reminded they could be guilty of misconduct and the regulator warned they should do their due diligence, put risk management systems in place and have sufficient compliance resources to monitor the finfluencer.
Speaking to Money Management, chief executive of Financial Simplicity, Stuart Holdsworth, said the guidance was welcome but also the consumer should be educated on how much weight they should give these platforms.
If consumers wanted to follow the advice of finfluencers, this should be a considered decision by them of the risks involved, he said.
“What is the onus on the Government or the industry to provide more education to consumers and to help them grade social media influencers versus licenced financial professionals and treat them with the appropriate level of weighting?”
Chris Brycki, chief executive of Stockspot, agreed and said it was often difficult for consumers to distinguish between what was a sponsored affiliate advertisement versus an unpaid review.
“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.
“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.”
Holdsworth also said many consumers were “daunted” by financial advice and providing so much personal information to an adviser which was a factor helping the growth of advice via social media instead.