The UK’s FCA has said it is alarmed at the rise in financial influencers, or ‘finfluencers’, on social media – particularly because so many are focused on newer business models like buy-now-pay-later and cryptoassets.
The FCA has now proposed new guidance for social media ‘finfluencers’ – after seeing a growing number of promotions falling short. It has said that promotions need to be clear, fair and not misleading. They also need to be balanced, and include details of risks as prominently as those of the rewards. The rules cover all sorts of content – including memes.
“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,” said Lucy Castledine, Director of Consumer Investments at the FCA. “And for those touting products illegally, we will be taking action against you.”
The regulator said it will consult for eight weeks before implementing changes.
“The Wild West of social media ‘finfluencers’ has received a warning shot from the FCA,” said Sarah Coles, a personal finance analyst with Hargreaves Lansdown. “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.”
Coles said such promotions often target young people, with faith in influencers. And it does seem to have an impact: the FCA says that 58% of the under 40s who’ve invested in high-risk products like cryptocurrency were influenced by social media hype.
In a world where would-be crypto-currency investors have received tips from Kim Kardashian, and memes promoting Buy-Now-Pay later schemes, it has seemed as though anything goes. The FCA says it has seen a growing number of ads falling short of existing guidance, so this is an effort to clarify the rules, and then start taking people to task.
“There’s an awful lot to welcome in these rules Clearly they should be fair, clear and not misleading,” said Coles. “They need to be balanced – so they don’t just highlight the potential benefits of a product but the relevant risks too. And the risks can’t just be hidden away in small print, or on links you need to click on to understand.”
Hargreaves Lansdown is arguing that 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,” Coles said.
The FCA has also teamed up with the UK 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.