AFSLs paying finfluencers questioned by ASIC
Some Australian financial services (AFS) licenses who are paying finfluencers to promote their products on social media are being “engaged” with by the corporate watchdog.
The Australian Securities and Investments Commission (ASIC) said in a question on notice from the Standing Committee of Economics that it was reviewing select finfluencers to understand their business models and how the financial services laws applied to their activity.
ASIC’s review included social media platforms such as Facebook, Reddit, Instagram, YouTube, and TikTok.
“We are monitoring developments in this space and commencing engagement with finfluencers to understand their business model and how they are considering the application of the licensing framework in the Corporations Act,” it said.
“We are also engaging with selected AFS licenses who are paying finfluencers to promote their products on social media, including TikTok.”
ASIC noted increased levels of retail investor participation and interest in investment was to be encouraged but it needed to be in an informed, safe, and sustainable way.
“However, some of the finfluencers appear to be providing advice and are getting paid by other financial product providers to promote their products,” it said.
“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.
“We are concerned that inexperienced investors may be increasingly acting on financial advice from unlicensed providers. This may result in conflicted or poor advice being provided to users who may suffer financial loss. It also provides finfluencers with a competitive advantage as they are not subject to the costs and burden of regulation that other AFS licensees are required to comply with.”
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
