Finfluencers – The Rise and the Risks

The number of Finfluencers producing content on social media platforms has risen dramatically in recent years, and with this, we have seen concerns escalating due to an ever-growing number of young people, in particular, falling victim to scams, often as a result of advice that they have seen online from Finfluencers.

The FCA has said that 62% of 18-29-year-olds follow influencers on social media, and of those, 74% said they trusted their advice. More worryingly, according to the FCA, 90% of followers within this age range said that influencers had encouraged them to change their financial behaviour, with Steve Smart, the joint executive director of enforcement and market oversight at the FCA, stating that:

“Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt.”

As a result, Finfluencers have been coming under increasing scrutiny from the FCA.  

In March of this year, the FCA warned Finfluencers of the need to keep their social media ads lawful while issuing further guidance on financial promotions on social media. 

The guidance can be found here.

It seems, however, this advice is not being heeded as in July, we saw trial dates being set for nine individuals charged by the FCA about an unauthorised foreign exchange trading scheme promoted on social media, and last month, twenty Finfluencers were interviewed voluntarily, under caution by the FCA, for potentially promoting financial services products illegally.  

These interviews involved finfluencers promoting foreign exchange and contracts for difference (CFD) trading, being high-risk investment products used to bet on the price of an asset, often the price of foreign currencies. 

Other areas of concern for the FCA are unlawful promotions around credit lending and debt solutions.

The FCA is carrying out searches to identify and take action against finfluencers promoting financial products or services without appropriate permissions.

It is yet to be seen if the FCA will begin to target Finfluencers offering advice on these products to their followers.

Promoting regulated financial products without approval from an FCA-authorised person is punishable by up to 2 years in prison.

The FCA has issued alerts on its warning page against social media accounts operated by finfluencers which may contain unlawful promotions. Potential customers should check this list before making any investments promoted by influencers and, of course, seek appropriate advice from qualified and regulated financial advisers.

Whilst the FCA currently has little power to force sites to remove content, the expectation is that the platforms hosting such contact (including the major social media platforms -  Instagram, Facebook, YouTube and TikTok) will take steps to remove harmful content. 

The FCA is also increasing its ability to undertake searches across multiple social media platforms to weed out infringing content. 

Therefore, operators of such platforms should ensure they have robust terms in place on their platform with specific standards on what content can be uploaded and give providers the right to remove any content that the platform believes is or could be illegal.