From noisy budgets to math for girls, there’s plenty of financial advice on social media – the problem is, not all of it is trustworthy. So the Financial Conduct Authority has stepped in with new guidance for those distributing financial advice online.
Influencers now face up to two years in prison, an unlimited fine, or both, if they fail to provide adequate risk warnings when advising consumers on financial products.
The UK watchdog warned in a 47-page report that this guidance extends to memes, game streams and reels.
“Any marketing for financial products must be fair, clear and not misleading so that consumers can invest, save or borrow with confidence,” Lucy Castledine, director of consumer investment at the FCA, said in a statement.
“Promotions aren’t just about likes, they’re about the law,” Castledine warned. “We will take action against those who advertise financial products illegally.”
The regulator warned that the new rules also apply to communications originating outside the UK if they are capable of having effect in the country.
Generation Z relies on social media for financial advice
The hardening position comes as young people shun traditional financial advisors and banks in favor of social media.
TikTok, the birthplace of female math, noisy budgeting, and “my payday routine” videos, is undoubtedly the go-to platform for financial hacks.
According to research from Intuit Credit Karma, the hashtag #FinTok has a staggering 4.8 billion views on the site as more than a third of Generation Z rely on influencers as their primary source of financial information.
In contrast, less than a tenth said they would turn to a financial services provider for similar help.
Another report from the CFA Institute found that Gen Zers are more likely than any other generation to engage with financial content on TikTok, YouTube and Instagram.
But while regulators typically require financial services professionals to follow strict rules, including disclosing any conflicts of interest or financial incentives with their recommendations, only 20% of finfluencers’ investment content contained any form of disclosure .
There has also been a rise in celebrities endorsing investment opportunities and distributing unregulated advice on social media.
Just last year, actress Lindsay Lohan, rapper Akon and singer Ne-Yo were forced to pay tens of thousands of dollars to settle allegations that they promoted cryptocurrency investments to their social media followers without disclosing being paid to do so.
Kim Kardashian was also fined $1.26 million for promoting Ethereum Max, without disclosing to her followers that it was a paid promotion.
The FCA has already removed 10,000 “misleading” adverts.
The FCA said it had already stepped up its “policing of financial promotions”, adding that last year it asked firms to remove more than 10,000 “misleading adverts” from social media, up from around 8,500 in 2022.
It even asks companies to reconsider whether social media, where platforms have “limited character or space”, is the right place to promote complex products.
But for those who choose to promote paid or unregulated financial advice or products online, the regulator has provided some strict guidelines: risk warnings on TikTok and YouTube should be visible in all videos containing financial and non-financial promotions only in the caption of the post.
Likewise, in social media posts with multiple photos, such as an Instagram carousel post, risk warnings should be included in each image.
The FCA concluded that while consumers need to be wary of online scams and questionable advertising, it is important that influencers ensure they stay on the “right side of the rules and consider what would happen to their reputation if they were caught promoting products”. illegally.”