City watchdog crackdown on ‘finfluencers’
The Financial Conduct Authority (FCA) is cracking down on illegal and non-compliant financial promotions.
The proposals for new social media guidance will modernise the information firms should use when promoting financial products or services online.
For example, the FCA is consulting on extending its guidance to reflect the current ways social media is being used to advertise financial services and products.
Lucy Castledine, director for 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.
“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.”
The rise of ‘finfluencers’
The FCA has been ramping up its scrutiny of online, often illegal, financial promotions, recognising the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online.
For example, a recent study from Shepherds Friendly found that more than a quarter of ‘Gen Z’ get financial advice from TikTok.
The FCA is working with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products. This work has included an infographic, roundtable discussions and live events to build up awareness of the harm that can take place.
FCA engagement has also helped secure changes to the advertising policies of several big tech companies to only allow financial promotions that have been approved by FCA-authorised firms. The regulator will be continuing this engagement to ensure more is done to protect consumers.
‘Social media a blessing and a curse’
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Social media is a blessing and a curse. It provides a platform to share opinions and there is some good material out there, but there is also garbage content that frankly shouldn’t see the light of day.
“The advent of so-called finfluencers is a headache for the city regulator. The credentials of many so-called finfluencers are weak at best – if they exist at all. But there are also a number of well-versed and highly qualified financial professionals on social media offering solid guidance.
“The difficulty for the uninitiated is sifting the wheat from the chaff. The concern is those who experienced a baptism of fire by losing money on by making risky investments after seeing a misleading or scam ad could be put off investing for life and scupper financial goals.”
New rules for crypto
The social media consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers. From 8 October 2023, the FCA will ban incentives to invest in crypto, such as ‘refer a friend’ bonuses.
Firms must also 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.