As FPC’s financial education ambassador, Helen Thomas explains why we all need to be cautious of ‘finfluencer’ content online.
In recent months, there has been an increasing spotlight on ‘finfluencers’ – financial influencers – driven by the rise in unregulated individuals offering financial advice on platforms like YouTube, Instagram, and TikTok – which can expose consumers to risks such as misinformation or fraudulent schemes.
Many finfluencers target young, impressionable followers who may not fully understand the risks involved in high-return investment schemes. They often promote ‘get-rich-quick’ schemes or high-risk investments without proper warnings or disclaimers. It’s easy for followers to mistake these as solid financial advice when, in reality, they are risky gambles.
As a result of social media platforms such as these becoming popular sources for financial tips and advice, the Financial Conduct Authority (FCA) has expressed concern that they might lead platform users to trust oversimplified or overly optimistic portrayals of high-risk products like cryptocurrencies and complex investments.
Consumer Protection and Regulatory Oversight
In the UK, amid the growing concerns about the role of finfluencers in promoting financial products and services on social media, the FCA has been actively addressing the risks they pose, especially regarding misleading or non-compliant financial promotions. Alongside the guidance the FCA introduced last year, as part of the Consumer Duty regulations to tighten rules on financial promotions (to ensure they are clear, fair, and not misleading) it has this month launched targeted action against finfluencers and their use of platforms like Instagram and TikTok, where bite-sized financial tips may oversimplify or obscure important risks.
Compliance with Financial Promotions
A specific concern here is the promotion of financial products without proper risk disclosures. The FCA has highlighted that platforms with character limits (such as X and Instagram Stories) pose challenges for meeting regulatory compliance, especially in promoting complex services like “buy now, pay later” schemes.
Influencers and Unregistered Advice
The FCA has also ramped up efforts against unregistered financial advisors operating as finfluencers. Unlicensed financial promotions or compensation-based advice violate the Financial Services and Markets Act (2000). The FCA is holding both finfluencers and associated firms accountable, aiming to curb unqualified financial advice
Future Regulations and Impact
With the FCA’s increasing scrutiny, it is hoped that some finfluencers may leave the market or move towards formal advisory roles, potentially reducing the accessibility of informal financial content for consumers. However, these steps are vital to ensuring that financial advice shared online adheres to the highest standards of consumer protection
Market Stability
The promotion of unregulated financial products can lead to excessive market volatility and contribute to bubbles. The FCA’s actions aim to ensure that financial markets remain fair and transparent for all participants.
Legal Compliance
In the UK, anyone providing financial advice or promoting financial products must be authorised by the FCA. Many finfluencers, either unknowingly or wilfully, breach these rules. It’s only right that they be held to the same standards as traditional financial institutions.
What Does This Mean for Finfluencers?
The FCA’s message is clear: If you are giving financial advice or promoting financial products, you must be regulated. This crackdown will likely lead to increased penalties and legal action against those who fail to comply. For finfluencers who genuinely want to help their followers, this is a wake-up call to ensure they operate within legal boundaries. They need to ensure transparency, provide clear risk warnings, and avoid promoting high-risk investments unless they are authorised to do so.
Finfluencers around the world
And it’s not just a UK problem. In India, for example, SEBI (Securities and Exchange Board of India) has taken steps to address this issue by tightening regulations. New guidelines prohibit registered financial firms from associating with unregistered finfluencers and call for transparency in financial promotions, including clear disclosures about any compensation received. This move is aimed at curbing misleading promotions and protecting investors from uninformed or fraudulent advice. SEBI also emphasises the need for finfluencers to obtain proper licenses, which could foster a more professional financial advice sector in the country, but may also reduce access to genuine financial content
My Take: A Positive Shift
Having witnessed the rise of finfluencers firsthand, this crackdown seems long overdue. Financial content can be exciting, and who doesn’t want to feel like they’re getting insider knowledge? However, the line between entertainment and advice has become blurred, and that’s a worry. Hopefully as a result of the FCA imposing stricter oversight, consumer protection will increase, and social media financial advice align more strongly with established regulations.
This article is for informational purposes only and does not constitute financial advice.
