Watch out, social media influencers, your days of giving out unqualified, unregulated financial advice to the general public are numbered.
That’s the message from Britain’s financial regulator, the Financial Conduct Authority (FCA).
It has come up with new guidance on financial influencers, or “finfluencers” as they are known, after a number of social media promotions fell short of their hype and good industry practice.
The financial watchdog has launched a consultation into its proposed guidance that will last for eight weeks before implementing changes.
Sarah Coles, head of personal finance at Hargreaves Lansdown, welcomed the move and said that the Wild West of social media influencers had received a warning shot from the FCA.
She said: “It’s not so much that there’s a new sheriff in town, it’s the same old sheriff, but they’ve laced their boots up and left the comfort of their office. Among the guidance is a reminder that some of these promotions can actually constitute a criminal offence.”
The FCA has become concerned at the rise in financial influencers on social media – particularly because so many are focused on newer business models like buy-now-pay-later and risky investments like cryptoassets.
Finfluencers often target young people, with faith in influencers and they have an impact with 58% of under 40s who have invested in high-risk products like cryptocurrency having been influenced by social media hype, according to the FCA.
Lucy Castledine, director, consumer investments at the FCA, said:
“We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm,” adding: “We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online. And for those touting products illegally, we will be taking action against you.”
Up until now the world of finfluencers has been a regulation free zone, crammed with supposed celebrity investment tips and memes promoting Buy-Now-Pay-Later schemes. The FCA said it had seen many ads failing to meet existing standards so this is an attempt to clarify the rules and then start taking people to task, Coles said.
Coles said there was much to welcome in the rules, which should be fair, clear and not misleading. She stressed that they must be balanced, not only highlighting a product’s potential benefits but also its risks as well, with the risks prominently displayed, not hidden away in small print, or on links you need to click on to understand.
She added: “The clampdown on bad actors is vital, in order to help people save and invest with confidence. However, for responsible businesses doing the right thing, the challenge will be to implement rules that provide the right balance between offering the best information to help people make informed decisions, and offering it in a format that they will actually want to read. The pension example in the consultation, for example, isn’t going to do an incredible job of building enthusiasm for investing for the future.”
The FCA has also teamed up with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products.
The consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers.
From October 8 2023 incentives to invest in crypto, such as ‘refer a friend’ bonuses, will be banned by the regulator.
Firms will also have to introduce clear risk warnings and a 24-hour cooling period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments.
