Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Switch to regtech – ASIC to finfluencers
ASIC says Regtech could be a great solution after it effectively banned finfluencers from giving unlicensed financial advice with hefty prison time and financial penalties.
The corporate regulator has cracked-down on finfluencers spruiking online financial rubbish through social media and stepped up its warnings. ASIC says “unlicensed finfluencers could face five years’ jail time or fines of more than $1 million if they talk about stocks, investment funds or financial products.” A hefty fine for breaking a complex law.
“ASIC monitors select online financial discussion by influencers who feature or promote financial products for any misleading or deceptive representations or unlicensed financial services,” the ASIC information sheet states.
The danger is that finfluencers could now switch to cryptocurrency. This is an area that has no protections, ASIC is not able to regulate crypto assets as they are not deemed financial products.
So, if you do invest in those products, you’re effectively on your own.
This is the reason ASIC is trying to sway finfluencers towards Regtech. What is RegTech? Regulatory technology which ensures companies are more effective in reaching regulatory compliance. RegTech helps minimise the risk of human error by automating the processes.
In this context, ASIC suggested a refocus on going down the Regtech path where they could facilitate online discussions about financial products and services, replacing risky unregulated finfluencers. Regtech could solve the problem faced by retail investors seeking financial advice online. ASIC Commissioner Cathie Armour said, “Regtech companies could adapt their existing financial advice solutions to help social media users discuss financial matters.”
In 2021, ASIC’s Young People and Money survey found that “33 per cent of 18 to 21-year-olds follow at least one financial influencer (or finfluencer) on social media, while a further 64 per cent reported changing at least one of their financial behaviours on the advice of a finfluencer.” Last year, the survey found that 64 percent of Australians who followed financial influencers reported altering or deleting past social media po
