‘Finfluencers’ or Financial Influencers are social media denizens who, purportedly, simplify complex investment concepts so lay people can use such concepts to invest or speculate. Fin twit on the other hand refers to the collective that discusses all matters financial on Twitter (at least for the moment – the jury is still out on the outcomes of Elon Musk’s overhaul).
Seen as a source of information on everything from body care to setting up savings plans, ‘finfluencers’ have seen a meteoric rise, especially among those under 40 (Gen-Z or Zoomers), with an outsized influence over individual decisions. According to a recent article in World Economic Forum by a founder at qure.finance, a crowd-sourced advice platform, that number is touching $104 billion. Larger retail-oriented services firms also have jumped onto the bandwagon to attract said Zoomers and to quickly disseminate information. So much so that when crises hit an investment manager a few years ago, the first thing they did was call up their set of influencers to push the party line rather than issuing press releases.
By helping companies better connect with their target clientele and assisting with neutral “monetary education”, these entities have created a money-spinning public service which seemingly benefits all .. or does it? Indian capital market regulator SEBI recently started to investigate the activities of influencers to determine whether this affects investor risk or constitutes unlicensed recommendations.
Social media doesn’t just allow for broadcasts, it allows a one-on-one conversation as well with little or no regulatory oversight. The other problem: while this content started as a way to provide short capsules explaining concepts, shorts / Tik-Tok / Reels have all been prolific avenues for punting everything up to and including Options trading. Typically considered the domain of sophisticated or ‘qualified investors’, Options strategies constitute high risk with little or no downside protection and, therefore, deemed unsuitable for retail investors. Consequently, SEBI is highly likely to look at the larger social media space and determine what constitutes advice and should there be a violation of guidelines, stiff fines may be proposed (according to a national newspaper, ₹10 lakh for the first offence and ₹50 lakh for repeat offences). Regulations haven’t been notified yet and those would be little consolation to anyone taken in by such advice.
However, financial education has over the years been lost to verbosity and meaningless jargon. One has to look at the spends of some investor education or protection initiatives to see disguised sales campaigns and even regulator-sanctioned websites have guides which sometimes constitute two pages of bullet points on Do’s and Don’ts.