Australian Financial Experts Welcome ASIC’s Warning to Unlicensed Financial Influencers

Have students learned to depend on tech for answers rather than thinking for themselves?(OLI SCARFF/AFP via Getty Images)

Financial experts have welcomed the Australian Securities and Investments Commission’s (ASIC) warning to social media financial influencers for providing financial advice and services online without a license.

ASIC stated that financial advice and services must be provided by licensees and that social media influencers, often called finfluencers, who provide financial product advice and financial services can face significant penalties under the Corporations Act. Under this act, offending individuals could be penalised for up to five years imprisonment, with corporations facing up to millions in financial penalties.

Additionally, finfluencers promoting or presenting financial products in a misleading representation of the actual product or making predictions without reasonable grounds and verification can all be considered breaches of the act, regardless of their license status. Other unlicensed influencers that receive benefits or payments for their comments to a financial product may also be at risk of offences.

“The information sheet by ASIC is a wake-up call for finfluencers (financial influencers), who have been making a huge amount of money from content sharing and promoting affiliated products,” Dr Angel Zhong, a finance lecturer from RMIT, said.

“The information sheet formally warns finfluencers that ASIC is monitoring their online activities and reiterates the licensing requirement in the context of finfluencers.

However, Zhong said that while the information is useful from the perspective of the content creators, she argued that it does not target consumers and suggests that ASIC should be “actively promoting the information among the viewers of the content.”

ASIC’s recent statement comes after its 2021 young people, and money survey (pdf) found that 33 percent of Australians aged 18 to 21 followed at least one financial influencer on social media, with two-thirds of young Australians reporting changing at least one of their financial behaviours due to following a financial influencer.

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

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

RMIT University research in 2021 on Google’s withdrawing its search business in China in 2010 also found that financial information consumed online directly influenced investment decisions rather than merely justifying people’s existing ideas, adding to the significance of the implications unverified social media content can have on its viewers.

Zhong suggested that ASIC can consider conveying messages to young and inexperienced investors that rely heavily on finfluencers in a “fun and engaging way” by using social media, just like online influencers, to protect their financial wellbeing.