Are All Finfluencers Bad?
Why Is ASIC Cracking Down?
In the current era of social media influencers, it seems there is an online presence advising for nearly every aspect of life. “Finfluencers” make up a population of online influencers selling financial advice and products to help others make money. Their advice covers where to invest and how to grow savings among a myriad of other financial tips. In the present climate of crypto and investing, followers are hungry for quick fixes to maximize their income and help their savings grow.
However, many influencers operate without proper licensing or education to be offering such services to their expansive audiences. The Australian Services & Investments Commission (ASIC) is cracking down on online influencers offering financial services and advice without the proper licensing. Are influencers all that bad? Why is the ASIC getting involved?
The ASIC enforces laws and regulations for product consumers and preserves market integrity. The process of obtaining an AFS license covers these rules and regulations, to ensure those offering financial advice are qualified to do so. Without the AFS license, the general public can be influenced to make poor financial decisions based on an influencer’s popularity and public image.
Social media allows users to paint a picture of their lifestyle and wealth, even if this is not the reality of their day-to-day. If a user intends to grow a massive audience, they may display falsehoods to grow their followers and audience. This is especially problematic when it comes to financial advice and products as it threatens the livelihood and capital of individuals buying into their advice and product sales.
The ASIC has established penalties for those administering financial advice without the proper licensing. The penalties include fines and potential imprisonment for those found guilty of operating without an AFS license. Many businesses, including financial advisers, hire influencers to sell and promote their products as well as offer advice.
Under the latest crackdown on influencers, the ASIC urges AFS licensees using influencers to promote products to their due diligence and closely monitor the content created. The AFS licensees will still be subject to penalties if their influencers are violating the latest code of conduct. The ASIC urges AFS licensees to make sure their social media team is familiar with financial services laws.
The ASIC is cracking down on influencers offering financial advice and selling financial products. The laws require anyone promoting these things to obtain a proper AFS license and to adhere to all financial services laws.
Offering well-rounded reviews or advice on a given product does not fall under the restrictions. However, operating from a sales perspective and making ungrounded claims of guaranteed money-makers are seen as intent to influence users in purchasing a product becomes unlicensed financial advice, and violates the law.
Dealing by arranging involves acting as a direct link from product to consumer. Users can suggest the names of platforms and stocks but cannot actively connect the product to consumers, as this falls under unlicensed financial advice.
The ASIC strictly forbids any misleading or deceptive advice to be shared by influencers.
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