LOCAL STORIES

ASIC - Influencers providing money advice have been warned

Friends/family

News/media

Financial adviser

Other

Other financial Professional 10%

9% 22%

18% 35%

Warren Strybosch

Who do you get your money or finance advice from? For many people they rely on their friends and family. For others, it is their professional advisor. In the past their professional advisor was the accountant but now that accountants can longer provide financial advice anymore, more people are turning to licenced financial planners. However, there is a growing number of people who do not seek professional advice but rather put their faith and trust into financial influencers or ‘fin-influencers’.

With a recent survey conducted by the Australian Securities and Investments Commission (ASIC), they found that over 33 cent of 18 to 21 year-olds are following someone a fin influencer on social media to obtain money advice. ASIC has become concerned about these influencers that they have released a paper INFO 269 warning social media influencers of the substantial risks and penalties they face if they promote financial products and services online.

The information sheet warns that anyone discussing financial products and services online or promoting affiliate links must understand their legal obligations, including whether they are providing financial product advice or arranging for followers to deal in a financial product.

“Make sure your content is accurate and balanced. If your online post is misleading, you may be breaking the law.”

ASIC stated that influencers can share factual information but if that information is presented in a way that conveys a recommendation that someone should or should not invest in a product or a class of products, then this may be a breach of law.

“If you’re an influencer who receives benefits or payment for your comments in relation to financial products, you’re

Social media

more likely to be providing financial product advice because it indicates an intention to influence the audience,” the information sheet warned. ASIC commissioner Cathie Armour said the way investors access information is changing.

“It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk,” said Ms Armour.

“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing. If we see harm occurring, we will take action to enforce the law.”

Dr Angel Zhong – who is a senior lecturer in finance in the school of economics, finance and marketing at RMIT University - applauded the move by ASIC, after recent research by the university found that financial information consumed online influenced investment decisions.

“Unverified investment advice is no different to fake news, which is frequently flagged by social media platforms that urge viewers to read with caution,” Dr Zhong said.

“Newbie investors are particularly susceptible to receiving dodgy financial advice, as the internet replaces traditional outlets like accredited financial advisers.

As one of Australia’s most popular fin influencers, better known as the Bare Foot Investor, we emailed Mr Scott Pape, seeking his response to INFO 269. We asked him to comment on his audio books which direct clients to use certain industry funds and personal insurances within those industry funds. Lastly, we asked him if he would be making it clear that he is no longer able to provide

6%

Source: ARdata consumer survey 2022

financial planning advice since giving up is Australian Financial Services Licence back in 2020. As of writing this article, we have had no response from Mr Pape.

As a side note, we acknowledge that the financial planning world has changed a lot over the past few years, and it is hard to keep abreast of these changes. We would encourage Scott to review his material in his books before releasing the next edition. For instance, he may not be aware that most industry fund insurers have changed their Total and Permanent Disability terms about five years ago and now have made it very hard for anyone to get a claim paid under their ‘any’ occupation definition. Also, professionals should consider an ‘own’ occupation definition which cannot be offered by industry funds. Pricing is another factor. Often it is cheaper in the long term to take up personal insurances with a retail insurer whilst still paying the premiums from their industry fund as a rollover. Given industry funds don’t offer level premiums, for young people, having a level premium policy can save them thousands of dollars in the long term compared to stepped policies.

Whilst Financial Services Minister Jane Hume last year compared the influencers to “taxi drivers…giving stock tips”, ASIC has taken a dimmer view. Last month, the corporate watchdog updated its guidance and warned unlicensed influencers could face up to five years in prison or significant fines for breaking financial services laws.

ASIC, in the past, have made bold statements and often their bark has been bigger than their bite. It will be interesting to see if ASIC will follow up on INFO 269 as undoubtedly, fin influencers, will continue to provide comments that may be construed as providing ‘money’ advice that they consider is not always in the best interest of consumers.