Finfluencers are on the rise, so are they friend or foe? It can be murky territory – ABC News

You'veall probably heard of influencerson social media. But do you know much aboutfinfluencers?

After taking off in the US, they've been gainingpopularity in Australia in recent years.

Basically, they're people who use social media as a platform to share advice on anything from budgeting to buying a house, to investing.

At best, many argue they're empowering Gen Z, millennials and first-time investors to become financially savvy. After all, financial advisers can cost many thousands of dollars, and we don't all have that kind of money to spend.

At worst,they're sometimes accused of spruiking particular products for their own financial gain. And that means that when you're scrolling through Instagram or Tik Tok, you're getting financial tips that aren't necessarily in your best interests.

So why are we even talking about this?

Well, the laws around providing unlicensed financial advice are murky and recently there have been calls for more regulation and oversight.

We dived into the topic to find out what you need to consider when you're swiping through their content.

The rise of the finfluencer has coincided with a spike in new millennial and Gen Z investors piling into the share market.

Instagram

It's estimated about 435,000 new investors bought stocks for the first time last year. Eighteen per cent were younger than 25, while 49 per cent were between 25 and 39, according to research house Investment Trends.

On Tik Tok, the hashtag #FinTokused by finfluencers like Queenie Tan has attracted more than 400 million views, while #stocktock has 1.4 billion, #crypto 4.38 billion, and #cryptocurrency 1.68 billion views.

While Ms Tan doesn't have a finance degree and isn't a licensed financial adviser, she's doing well enough that she's been able to quit her marketing job to focus on creating her online investment content.

"I started my YouTube channel last year during COVID because I saw there were a lot of people struggling financially during that time," she explains.

"I don't come from a rich family, and I felt like I needed to share information and things that I've learned over the past couple of years."

The 23-year-old makes up to $5,000 a month from the advertising on her YouTube videos, which she films in her lounge room, as well as from partnerships with banks and investment platforms.

When Australians are asked whom they trust,their answer is near unanimous: definitelynotsocial media influencers.

She has 17,900followers on YouTube, 20,300on Instagram and has pulled more than 400,000views from TikTok (where she has about 62,000followers).

Like many finfluencers, Ms Tan is careful to add a disclaimer to her social media posts.

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"I am not a financial adviser and this is not financial or investing advice," she says in one video.

She also regularly refers to federal government websites like MoneySmart.gov.au and the ATO.

Ms Tan says her videos fill a gap in the market.

"It's important for young people to feel inspired and to have money not be a taboo topic. And that's why I wanted to create content for free to help people that maybe don't have thousands of dollars to see a financial adviser," she says.

Angel Zhong, senior lecturer in finance at RMIT, says while most Australian finfluencers do act responsibly, there is a dark side to the phenomenon.

ABC News: John Gunn

She says "pump and dump"scams, in particular, are rife online and are mostly promoted by American social media users.

It's when someone artificially inflates the share price of a stock (or cryptocurrency) by really talking it up in order to increase trading (like what happened with Dogecoin). Once the price increases,scammers sell the shares at aninflated price.

"I've seen people encouraging their followers to borrow on a specific lending platform to invest in a particular cryptocurrency or they've been encouraging some of the followers to quit their job and become a full-time day trader, which is a highly risky behaviour," she says.

It's an issue that's also caught the attention of the regulator, ASIC.

Well, they're proving to be the most popular way for young people to start out trading. Just ask Jasmine, who's using doing it to build up her first home deposit.

It's recently urged young investors to report pump and dump scams as well as users who provide financial advice without a licence.

ASIC says it's seen evidence of complaints about social media users in Australia, but it did not provide further details.

According to Dr Zhong, guidance about online discussions on investment really needs to be updated, as the latest advice was introduced in 2007.

And she says it's really tricky to regulate when, for example, stories on Instagram can disappear after 24 hours.

She says at the end of the day, ASIC risks being left behind.

Finfluencers themselves are concerned about straying into the territory of illegally providing financial advice.

Aleks Nikolic, who goes by the name Broke Girl Wealth on Tik Tok and Instagram, also works as a corporate lawyer.

Instagram

"I recognise that this is a really complex area of law, and I think it is deliberately that way so ASIC can prosecute nefarious actors, but I think that it would be really great to see more clarity from the regulator," she says.

Ms Tan agrees and says most finfluencers will comply with the guidance.

While there may be some people who are trying to deceive followers, people like Aleks and I are referring people to factual information," she says.

However, Ms Nikolic is concerned a crackdown by the regulator could scare some people off sharing their personal finance journey.

"It is such a valuable thing, when we know that money for women is actually a really critical factor to financial independence," she says.

Finance Minister Jane Hume has not backed calls for further regulation and says banning finfluencers is not the solution.

"We know that ASIC is looking at this space right now and reassessing the role of finfluencers. But there is an element of buyer beware," she explains.

"It's important that [when] taking any information from social media that you check the credibility of the source. And of course with financial advice, that means is this person licensed to give me this information?"

Senator Hume says people offering advice about personal investments at the pub, or a taxi driver giving stock tips, is nothing new.

"We've seen that forever and a day And that's very different from recommending a financial product, or selling a financial product and giving financial advice, which is a clear breach of the law," she adds.

It's a sentiment the financial planning industry, which came under fire during the banking Royal Comission,rejects.

"If you're on social media, you can get out to hundreds, potentially thousands and potentially millions of followers who are going to take on board that advice. We're looking at a completely different situation," says Judith Fox, the CEO of the Stockbrokers and Financial Advisers Association.

Ms Fox says the industry can be trusted and points out that as well as completing a degree, sitting an exam and annual training, the clients of financial advisers are protected by law.

"You [financial advisers] can also have complaints lodged against you. And that means that you are accountable to make sure that you're always fulfilling the clients' best interest. If you're not licensed, none of that applies, which means there's no regulation, no accountability."

But Ms Nikolic saysthe fear from financial advisers was a bit hypocritical.

"We have seen that regulation in and of itself does notalways provide good outcomes," she says.

"What we need is considerate financial consumers, who can do their own research. If we lift people into seeking financial independence, everyone wins."

Dante De Gori, CEO of the Financial Planning Association, agrees with Ms Fox, but he can also see the positives of finfluencers. He says most are not breaking the law.

"There is an element of good for people being engaged in their finances, if it encourages people to do further research on the internet, and possibly even eventually with a trained professional," he says.

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Finfluencers are on the rise, so are they friend or foe? It can be murky territory - ABC News