“I wish I could say this is an isolated example,” Kirkland said, explaining the regulator’s concern about a small cohort of advisers who transfer client funds into high-risk investments after being referred by cold-calling telemarketers.
The industry has little chance of fighting through the legislative backlog and getting immediate wholesale change made to the ill-designed CSLR. There are things the government can do in the interim, said the FAAA, but who’s listening?
Finfluencers warned on the blurred line of financial advice
The financial services industry has not been immune from the socialisation and digitisation trend, with finfluencers now among the most powerful voices in the sector. The idea of a finfluencer is simple, springing from the “Instagram influencer” title that many younger people have sought to achieve, but simply with a financial twist.
Spurred by the events of 2020, with so many people locked down at home in receipt of stimulus cheques or at least growing savings from an inability to socialise and spend in person, the finance and investment social media sector has exploded. It ranges from the very best, being education-focused, community-based platforms, to the worst, being pump-and-dump schemes.
Unfortunately, the switch from influencer to “finfluencer” is not as straightforward as it seems, with financial services being among the most regulated sectors in Australia, if not the world. The influencer army has effectively done what no industry fund or fund manager has been able to, which is to engage directly with consumers on finance, causing a boom in the industry.
It was therefore only a matter of time before the regulator stepped in, with the Australian Securities & Investments Commission (ASIC) this week releasing an information sheet to remind these influencers of the obligations they have in the sector.
The paper opens with a warning: “ASIC monitors select online financial discussion by influencers who feature or promote financial products for any misleading or deceptive representations or unlicensed financial services” – before highlighting the significant penalties that any person, influencer or not, may face for breaching the Corporations Act.
ASIC declares “when you discuss financial products and services online or promote affiliate links, make sure you understand your legal obligations including whether:
- you are providing financial product advice or arranging for your followers to deal in a financial product. If you carry on a business of providing financial services, you must hold an AFS licence
- your content is accurate and balanced. If your online post is misleading, you may be breaking the law.”
The sector is so diverse that anything more than a broad brush is difficult to apply, with the biggest challenge being to differentiate between providing general information, providing advice or just explaining one’s own experiences with investing.
“if you present factual information in a way that conveys a recommendation that someone should (or should not) invest in that product or class of products, you could breach the law by providing unlicensed financial product advice,” the paper says. Commenting on the popularity of paid or sponsored posts, the regulator expands: “if you’re an influencer who receives benefits or payment for your comments in relation to financial products, you’re more likely to be providing financial product advice because it indicates an intention to influence the audience.”
Thankfully, ASIC provides a number of case studies for those seeking to navigate the complex issue, with the following among them:
- Influencer comment: ‘I’m going to share with you five long-term stocks that will do well and which you should buy and hold.’
- ASIC’s view: Intends to influence someone’s decision to buy specific financial products. Provides an opinion about these products. It is likely to be financial product advice.
- Influencer comment: ‘You can invest by buying shares – this means you are investing in a company and you get to vote on the company’s management and potentially earn dividends. On the other hand, ETFs can track different asset classes or individual assets that may generate a return, but the ETF provider owns the shares or assets on behalf of the fund members.’
- ASIC’s view: Description of different types of financial products, with no implied recommendation that one is better than another. It is unlikely to be financial product advice.
- You promote a link for your followers to access an AFS licensee’s trading platform to trade financial products. It’s a unique link that can’t be accessed anywhere else.
You receive a payment from the licensee for each click-through resulting in use of the platform. People that access the link also receive a benefit when buying the products because of your unique link.- ASIC’s view: You’re actively involved in making the transaction happen. The unique link benefits you and adds value for your followers who access the link. This is likely to be dealing by arranging.
