Social media 'finfluencers' on platforms like TikTok, Facebook and Reddit are not going away, and neither is the demand for content on investment, budgeting and finances, says Finance Services Minister Senator Jane Hume.
But there's no need to regulate Fintok influencers, Senator Hume said in a speech on Thursday, brushing off the seriousness of the so called 'advice' being given by unqualified social media influencers.
"A TikTok influencer is Generation Z’s Paul Clitheroe or Scott Pape," Senator Hume said at the Stockbrokers and Financial Advisers Association annual conference.
"The TikTok influencer spruiking Nokia is not that different to the bloke down at the pub who wants to tell you all about the really great company he just invested in — but with a much louder voice.
"This isn’t financial advice, but as has been the case since taxi drivers started giving stock tips, it is an inevitable part of a financial ecosystem."
But Senior Lecturer in Finance at RMIT University, Dr Angel Zhong doesn't think that's a fair analogy.
"A TikTok influencer reaches a much wider audience compared to someone in the pub," Dr Zhong told Savings.com.au.
"TikTok influencers earn from posting videos while a bloke down the pub does not earn money talking about finance in the pub."
Senator Hume acknowledged the global reach of social media allows influencers to reach a wider audience and that investment advice given by finfluencers could result in financial losses, but said people have to take some level of personal responsibility.
"Inevitably, some of the information and opinions that consumers receive from online forums will be bad. But some of it will be good. And a lot of it will better engage younger generations in investment and financial markets," Senator Hume said.
"While it is frustrating for investment professionals to watch, at some point we have to let people make their own decisions.
"We have to back Australians to be sensible enough to judge for themselves whether to put their hard earned money into higher-risk assets.
"It's about personal responsibility and common sense."
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ASIC concerned unregulated financial advice is fuelling high-risk investing behaviour
The comments are at odds with concerns flagged by the corporate regulator.
The Australian Securities and Investments Commission (ASIC) recently cautioned against relying on unmoderated investment advice being given on social media, known as 'social trading'.
"ASIC also cautions first-time traders against relying on claims made in advertisements and on social media forums. Online scams, unlicensed advice, and misinformation about products and trading strategies are becoming more common," ASIC said in a statement.
"Information and advice on social media forums such as Reddit, Facebook and LinkedIn may be conflicted.
"Some companies and product issuers pay promoters to post favourable comments to encourage first-time traders to invest."
The concerns were raised after a recent Investment Trends report found a whopping increase in the number of new retail investors during the COVID pandemic.
According to the report, 435,000 Aussies joined the share market during COVID for the first time, bringing the total number of active online traders in Australia to 1.25 million.
Greg Yanco, Executive Director, Markets at ASIC, said while people taking an interest in investing is great, first-time investors need to educate themselves about the volatility and complexities of market trading from reputable sources.
“The GameStop incident in the US, coupled with consistently low interest rates and the ongoing hunt for yield in today’s market, have inflated people’s appetite for risk,” Mr Yanco said.
“Everyone is entitled to take risks. However, we advise first-time investors to focus on long-term goals and not make rash decisions based on a fear of missing out on market falls or gains.
"We also recommend learning about trading before you start or getting advice from someone you trust.”
To regulate or not to regulate?
Senator Hume argued that regulating unmoderated investment advice would smother opportunity for self-improvement.
"If we say that consumers should not use the internet to learn about investment opportunities for fear that they make mistakes, we risk losing a generation of financially literate, engaged retail investors."
But Dr Zhong said there's a big difference between getting your financial advice through a legitimate source versus a Fintok influencer.
"Reputable sources like MoneySmart do not recommend a particular stock or cryptocurrency, whereas a lot of influencers recommend particular investment products such as stocks, ETFs, cryptocurrencies," Dr Zhong said.
Dr Zhong said the government and social media platforms need to think about how to regulate unmoderated financial advice to protect fledgling investors.
"To begin with, Fintok influencers need to put out explicit disclaimers. Platforms such as Tiktok should put out explicit disclaimers, terms and conditions or warning to those who are watching finance related videos," Dr Zhong said.
"The government needs to monitor unmoderated and unlicensed financial advice to ensure healthy development of a stable financial market.
"This is becoming increasingly important given the large number of young and inexperienced investors in the market."
In a recent report by the Australian Financial Review, a Labor spokesman called on ASIC to up its game.
“ASIC can’t monitor every tweet, post or Reddit forum,” the spokesman told the AFR.
“But it can have a greater presence on social media platforms, providing warnings to consumers.”
According to the report, the corporate regulator is understood to have established 'working groups' to develop policy responses to the social trading phenomenon.
Photo by Mateus Campos Felipe on Unsplash
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