Opinion
The problem with taking advice from ‘finfluencers’
Victoria Devine
Money columnistFor better or worse, now when people go looking for life advice or want to find answers to burning questions, the place we increasingly turn to is social media. And sure, there are a lot of areas in our lives where this can be great. Suggestions on how to use up half a can of chickpeas or learning how to braid your hair is one thing. But when it comes to things like our health and finances, the risks associated with getting advice from unqualified influencers are exponentially higher.
That’s one of the reasons that I was happy to see that the Australian Securities and Investments Commissions recently took part in a global crackdown on financial influencers, also known as “finfluencers”, along with regulators from the United Kingdom, Italy, Hong Kong, Canada and the United Arab Emirates.
When people go looking for life advice, the place we increasingly turn to is social media.Credit: Dionne Gain
Following the crackdown, ASIC commissioner Alan Kirkland explained: “It’s important that consumers separate fun from fact when it comes to influencer content. Popularity doesn’t equal credibility.” In other words, a finfluencer might have 100,000 people eager to listen to what they have to say, but that doesn’t mean they have the qualifications, expertise or a legal right to be saying it in the first place.
In the UK alone, the regulator issued 650 requests for content to be removed from social media, 50 takedown requests to websites being operated by influencers, and seven cease and desist letters. The regulators also invited four influencers in for interviews, and made three arrests.
In Australia, though, the fallout was much smaller, with ASIC issuing just 18 warning notices to financial influencers suspected of providing unlicensed financial advice and/or unlawfully spruiking high-risk financial products.
As tempting as it might be to think that our markedly smaller numbers are a sign of Australian finfluencers being better, more honest people than those in other nations, that’s not quite it. The main reason for our A+ performance is a thing called INFO 269, which are guidelines ASIC issued in 2022 specifically outlining the rules and regulations for social media influencers offering financial advice. In addition to breaking down the legal standards influencers are required to meet before discussing or promoting stocks, financial products or investment funds, the guidelines also make the consequences of breaking any rules crystal clear: up to five years in jail, or fines of over $1 million.
These threats aren’t idle, either. In 2021, ASIC successfully filed a lawsuit against Tyson Scholz, an Australian finfluencer who dubbed himself the “ASX Wolf”. At the time, Scholz was offering stock tips via paid online subscriber groups to his Instagram followers, which sat at well over 100,000 people. At the time, though, Scholz did not hold a valid financial services licence, meaning his advice specifically on what stocks to buy was against the law. By 2023, he was facing bankruptcy over a $450,000 court-imposed debt from the regulator.
And it’s not just finance influencers who are being closely watched and regulated, either. In 2022, the Therapeutic Goods Administration announced restrictions on how influencers post about products such as vitamins, protein powders, supplements, sunscreen, medical devices and medicines. These changes mean influencers must clearly disclose if they are in partnership with a brand, and they also cannot share their personal experience with therapeutic products.
Following this, in 2023 the Australian Competition and Consumer Commission announced it was planning to crack down on influencers across the board who fail to disclose partnerships, brand deals or paid promotions of specific products to ensure people have a better understanding of what is advertising when they log on to social media. When it comes to finfluencers specifically, you can also check their credentials via ASIC’s professional registers search before taking their advice and investing any of your hard-earned money.
Following the publication of INFO 269 in 2022, ASIC reported a substantial drop in unauthorised advice and promotion from Australian financial influencers, and many undertook the necessary training to become authorised. This is likely why when the UK was busy making arrests, the Australian regulators twiddled their thumbs after issuing a mere 18 warnings.
And among Gen Z alone, almost one in three follow one or more finfluencers on social media, and 64 per cent have reported changing their financial habits as a result of this influence.
It’s estimated that around 76 per cent of all Australians now use some form of social media – whether that’s Facebook, Instagram, TikTok, YouTube, Snapchat or a combination of several. This means avoiding influencers on any topic is almost impossible, including finance. And among Gen Z alone, almost one in three follow one or more finfluencers on social media, and 64 per cent have reported changing their financial habits as a result of this influence. Considering how pivotal the early financial years of a person’s life can be, particularly when it comes to forming habits and developing a money mindset, we should be ensuring that the people who end up on their screens are being held to the highest possible standards.
Of course, I am no stranger to social media. As the host of a financial podcast and author of a weekly column about all things money, I recognise that in the eyes of many, I myself am a finfluencer.
But here’s the thing: someone calling themselves a “trading expert” (whatever that means) without a valid AFSL and promoting complex or high-risk investments via unaccredited courses or subscription-based access to information is dangerous. It also flies in the face of what I and so many other decent financial influencers believe in. Someone with no qualifications other than personal experience and hours of YouTube viewing, posing in front of a Lamborghini or a private jet while trying to convince people to hand over their hard-earned savings, should face consequences.
Across every industry and in every workplace, people have different skill sets. Generally, that’s what makes a workplace function well. But in the online influencing space, there is no bar to entry. That makes it an inherently high-risk place that requires policing and monitoring.
When the stakes involve people’s money, the bar for who can provide advice should be high. There should be checks and balances, and regular check-ins to ensure nobody is breaking the rules. In an ideal world, next time there’s another global crackdown, Australia won’t have to issue a single notice. Ideally, it shouldn’t be news at all.
Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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