Are TikTok finfluencers friend or foe?

Alex Burke,  Senior Writer,  No More Practice Education

In a recent feature, we outlined why one of the key ways to bridge the generational gap in advice is via the adoption of new technology and communication channels.

As Business Health principal Terry Bell explained, though, some older advisers – or perhaps just very busy ones – might find the prospect of doing this somewhat daunting. “If you’re the owner of a practice,” he said, “you’re looking at FASEA requirements, compliance, documentation, even COVID - and then you have to look at new tech on top of that? You’re worried about costs, you’re worried about working from home, you’re worried about the pandemic. There’s a lot going on. That’s why I think there’s a gap between ‘I’m doing this’ and ‘I’ll do this later.’”

This is why Terry recommended the recruitment of "younger players" who would be more naturally au fait with the kinds of topics and communication platforms that appeal to a younger prospective clientele. And as per a recent response from ASIC to a question on notice from Liberal MP Jason Falinski, some advice firms are doing just that – in a roundabout way. 

FinTok

Over the past few years, so-called "finfluencers" have exploded in popularity on social media. The portmanteau combines the concept of social media influencers – think oft-sponsored travelogues, fashion and lifestyle content – with the rising appeal of easily-accessible financial education material. 

Finfluencers are often found on TikTok (or "FinTok", as that part of the platform is known), which recently banned the promotion of financial products – but given finfluencers' ongoing popularity and perceived expertise in topics ranging from basic budgeting to crypto investments and explainers on real estate investment trusts, it's difficult to see the phenomenon dying down anytime soon. 

Which is why you may not be surprised to hear that some AFSLs, at least according to ASIC, are taking advantage of the situation by paying finfluencers to promote their services. After all, in the absence of a glut of new industry entrants bringing their social media expertise to established advice businesses, would it not make sense for those businesses to leverage finfluencers' popularity? From a certain point of view, it seems like a match made in heaven. 

Unlicensed advice?

The problem, of course, is that finfluencers generally don't have an AFSL of their own – which puts them, and the AFSLs paying for their promotional abilities, in murky legal territory as far as ASIC is concerned. In its response to Falinski, ASIC said that while it supported increased levels of retail investor participation in the market, "we want this to occur in an informed, safe and sustainable way. This contributes to market integrity and confidence for all investors." 

ASIC continued: "We are observing that many younger and first-time investors are accessing information from online forums – some of which may provide some useful information about the range of investments or products available. However, some of the finfluencers appear to be providing advice and are getting paid by other financial product providers to promote their products. 

"As most finfluencers do not hold an AFS license (and not subject to an exemption) they are not subject to the requirements that apply to licenses – including having adequate arrangements to manage conflicts of interest or to provide financial services efficiently, honestly and fairly."

To address these concerns, ASIC has "[commenced] engagement with finfluencers to understand their business model and how they are considering the application of the licensing framework in the Corporations Act" and will also review those licensees currently paying finfluencers for promotion.

One does wonder how many finfluencers – whose appeal can be significantly attributed to their accessibility, immediacy and responsiveness to their respective communities – would be willing or able to produce as much content as they currently do were they required to consider the "licensing framework in the Corporations Act" every time they published a video on TikTok. I'm sure there are plenty of advisers, fresh from doing the legwork involved in producing a new SOA, who could speculate on that. 

Of course, ASIC does have reason for its concern about the finfluencer set – as alluded to above, the term casts a pretty wide net. It can range from the kind of education material you've likely seen on TV before (or on ASIC's own website, moneysmart) to cryptocurrency pump-and-dump schemes where the call-to-action exposes investors to significantly more risk. 

Where do advisers fit in all of this? 

From a regulatory perspective, it remains to be seen whether it's possible to retain the potential benefits finfluencers present to their audience, such as increased financial literacy and understanding of (let's be honest) byzantine financial services terminology, while ensuring that there's nothing untoward going on. 

The more interesting question, though, is how advisers fit into all of this. ASIC's concerns about AFSLs paying for TikTok promo aside, what should advisers take out of the surging popularity of finfluencing? Are finfluencers charlatans providing pseudo-advice to an audience who'd otherwise be seeking out professional advice, or are they a necessary service for a chunk of the Australian population who have been priced out of (or in some other way alienated from) the financial services industry? 

Either way, one can infer that the majority of finfluencers' audiences aren't getting financial advice. But given their interest in finance, saving and investing, it's clear the appetite is there. So what do advisers do about it? They won't be able to join forces with finfluencers if ASIC brings the hammer down on those arrangements, but the popularity of this content bears out Terry's point at the start of this article: there's a big market out there but you need the right tools and technology to reach it. 

Just how advisers can use those tools while staying on the right of the law is another matter entirely, and one we'll explore in the coming months.


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