Regulators should engage with ‘finfluencers’ to make them aware of the rules around financial advice, a recent report has recommended.
The CFA Institute looked at how online financial influencers engage with Generation Z in the decision making process relating to investments.
The report, Finfluencer Appeal: Investing in the Age of Social Media, claimed a lack of financial literacy, limited interaction with regulated financial advisers and a preference for online information drove generation Z to influencers.
The report made a series of suggestions, including for regulators to “engage directly in constructive dialogue with finfluencers and explain which of their activities are regulated”.
It also stated influencers should be required to disclose their regulatory status.
Rhodri Preece, head of research at the CFA Institute said: “Finfluencers now play an increasingly significant role in educating young people about finance, with accessible content that is both informative and engaging.
“However, our research shows that finfluencer content often lacks sufficient disclosures, which can hinder the ability of consumers to evaluate the objectivity of the information, and some investors may be unaware when and how finfluencers are being paid to promote financial products.”
The study reviewed content across TikTok, YouTube and Instagram in the US, UK, France, Germany and the Netherlands.
It found 45 percent of the content offered guidance, 36 per cent included investment promotions and 32 per cent included investment recommendations.
Preece added: “Differences in definitions across markets for investment recommendations means complexity for finfluencers and a grey area for consumers of their content.
“Some finfluencers may be unaware that their activities are regulated and need appropriate disclosures.
“We urge regulators to consider a universal definition of an investment recommendation, and firms and social media platforms should work with finfluencers to ensure compliance with applicable policies.”
tara.o'connor@ft.com
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