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'Finfluencers' now on regulator's radar

Social media stars and online "influencers" could be giving unqualified and dangerous financial advice to their many followers, prompting the Financial Markets Authority to publish new guidelines for "finfluencers".

Tuesday, June 29th 2021, 6:11AM

by Matthew Martin

Rob Everett.

The Financial Markets Authority (FMA) says its guide to talking about money online follows on from concerns that some social media influencers and bloggers may be straying into the realm of regulated financial advice.

And, according to Compliance Refinery chief executive Steven Burgess, the FMA's guidelines are timely, necessary and important, and shows the regulator is adapting quickly to changes in the financial advice industry.

FMA chief executive Rob Everett says the new guide is primarily intended for social media influencers but also contains useful tips for consumers when they find someone providing financial commentary on social media.

“Many people now offer their thoughts and perspectives on all sorts of financial matters and some have built strong followings,” Everett says.

"However, influencers do not want to find themselves caught offering advice they’re not qualified or authorised to give.

"It’s also important for consumers to be wary of taking an influencer’s recommendation that might not be suitable for them,” he says.

The new guide emphasises that talking about money or investing can sometimes cross over into providing financial advice, for which you are required to have a licence from the FMA.

Anyone who gives regulated financial advice to retail clients (everyday consumers) must either hold or operate under a Financial Advice Provider licence meaning they are subject to a Code of Conduct requiring them to act with integrity and place the interests of their clients first.

The new guide includes examples of where discussions about financial matters might cross the line into regulated financial advice.

“It’s usually fine to talk about financial matters online as long as you keep it general,” Everett says.

“When you start getting into recommending particular products, like specific funds, stocks or insurance, or telling individuals what to do, that’s probably regulated financial advice.

“We’re also reminding influencers to be wary of promoting high-risk products like cryptocurrency and derivatives. Not only do these assets have a high risk of people losing money, they’re also often used as bait in scams.”

The guide says influencers should disclose all paid and/or gifted posts (in line with Advertising Standards Authority code), moderate comments and act responsibly, especially with vulnerable consumers.

The participation of retail investors has increased significantly over the past 18 months and social media was a component of that, says Everett.

Burgess says unregulated online financial advice is becoming more prominent and should be a concern to regulators.

"But the social space is massive and there's a lot of ways to make it are getting a lot of unsophisticated people trying to participate in a market that is quite sophisticated.

"It's obviously very difficult for the FMA to follow this."

Burgess says the FMA will be relying on people to report instances of dubious online financial advice and says the risks for uneducated investors are high.

"You don't get the people on these sites talking about big losses, all they tell you is that they are making money.

"I think it's great the FMA have come out with something like this.

"People are crossing those boundaries...and when you are seeing people online and they are telling people what to do it's obvious they don't understand the's remarkable quite frankly."

Burgess says it's also important for advisers to take this on board and use it as an opportunity to educate customers and potential customers about the risks of taking financial advice from those not qualified to give it.

The FMA is also encouraging social media financial commentators and influencers to seek legal advice where necessary as the guide is not intended to be a complete summary of the financial advice regime.

Individuals promoting themselves as financial advisers and who are not licensed could be liable for a penalty of up to $200,000.

To view the guide click here.

Tips for consumers:

- Be wary of what you see online. Social media posts by influencers are no substitute for professional financial advice.

- Some influencers are paid to promote financial products or services. This should be properly disclosed to you – but may not always be.

- Social media accounts or personalities could be based overseas where laws and regulation might be very different.

- Some products promoted online – particularly cryptocurrencies and derivatives can be very high risk and often not suitable for general investors.

- Be aware that online financial content also attracts scammers, including ‘scam bots’.

- Anyone providing financial advice must operate under a licence granted by the FMA.

Tips for influencers, bloggers:

- It’s fine to talk about financial matters online, as long as you keep it general.

- You can share factual information about a financial product’s features or terms and conditions but you can’t make a recommendation on who should or should not take up that product.

- Follow social media best practice, New Zealand’s Advertising Standards, and disclose all paid and/or gifted posts.

- Moderate comments made on your posts, including deleting any that could be scams or don’t meet your guidelines.

- Act responsibly and consider your audience, including any people who may be considered vulnerable.

- Approach paid unpaid or gifted partnerships for financial services and products with caution. 

- Don’t promote a product you don’t understand, and be cautious about promoting high-risk products like cryptocurrencies and derivatives.

- Remind your followers to seek regulated financial advice on money matters.

- If you start providing regulated financial advice you will fall under the FMA’s regime. You must have a Financial Advice Provider Licence.

- Don’t call yourself a financial adviser unless you are legally entitled to do so.

Tags: Financial advice financial literacy Finfluencers FMA guidance Rob Everett Steve Burgess

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