Thematic investing has long been a source of fascination for investors, offering the promise of outsized returns driven by major structural shifts. Yet, as three seasoned professionals—Jamie Nemtsas of Wattle Partners, Will Hamilton of Hamilton Wealth Partners, and Peter Johansson of JCE Advisory—discussed, the reality is far more complex.
Equity markets continue to defy expectations, but investors face mounting risks as valuations stretch to historical extremes. Hugh Selby-Smith, co-CIO of Talaria Capital, recently presented his insights at The Inside Network’s Alternatives Symposium, warning that today’s market environment demands a critical reassessment of diversification strategies.
ASIC sends a warning to finfluencers and their partners
ASIC has put financial services companies and fintech start-ups on notice, warning them against paying finfluencers to advertise products and services. So if you’re thinking of hiring an ultra-cool “finfluencer” to help redirect social media traffic to your website or to spruik your products or better yet, to share advice… you’d better rethink your marketing strategy.
In saying that, finfluencer numbers are growing through the social media platforms such as Facebook, Reddit, Instagram, YouTube and TikTok. The concern is that younger and more inexperienced first-time investors were taking advice from online finfluencers, some of which have been paid to spruik certain products.
Corporate regulator ASIC is warning corporations that pay finfluencers to advertise products and services about potential breaches of financial advice laws. ASIC commissioner Cathie Armour said some listed companies were actively using finfluencers for their network for a fast and effective way to promote investment products to young retail investors. She said “If you’re approached by a finfluencer seeking to collaborate, or you’re considering reaching out to one, make sure you do your due diligence as they may be contributing to your regulatory risks.”
ASIC has stepped in to stamp out financial advice that is being issued, that is not in the consumer’s best interests. The vast majority of finfluencers, do not hold an AFS licence, meet educational requirements or even have the knowledge to provide meaningful advice. If a finfluencer is found to be running a financial services business without the necessary education and paperwork, they could be liable for penalties under the Corporations Act. If a fintech or any other company enters into an arrangement with someone who is carrying on an unlicensed financial services business, you may be breaching the Act.”
ASIC also found that companies were using finfluencers to “pump and dump” shares. This in turn causes demand to rise on the back of this new hype bolstering its share price i.e. Gamestop. The concern is that finfluencers are earning remuneration from multiple sources and that is giving rise to an industry of spruikers with no financial knowledge giving advice that’s not in consumers’ best interests.
Going forward ASIC has said that it is talking with selected finfluencers to create a framework around advice obligations under the Corporations Act, responsibilities, business models and general advice obligations. ASIC is discussing the “limits of acceptable promotion”.
So, ASIC’s message is loud and clear – If you enter into an arrangement with someone who is carrying on an unlicensed financial services business, you may be breaching the Corporations Act especially if that finfluencer has vested interests to promote other financial products. Not only will there be a conflict of interest, but there is a genuine risk to your organisation.
