Laura Suter, director of personal finance at AJ Bell, comments on the FCA’s updated guidance for social media posts:
“The regulator is trying to tackle a very large, very hard-to-grasp beast by bringing in tighter regulation on social media adverts for financial products. There has inevitably been a surge in paid-for promotions of financial products, particularly cryptocurrencies, in recent years. We know that social media plays a huge part in people’s research of investment products, particularly among younger, newer investors. One in six investors used social media to either research investment, find new opportunities or get updates on existing investments – but this rose to half of all investors aged 18 to 24, according to the FCA’s Financial Lives survey.
“The FCA is sending out a warning signal to finance companies and influencers that they need to stick within the rules when it comes to social media. But the regulator isn’t introducing any new rules or penalties for those who post misleading content, instead it has just tweaked the guidance to give more examples of when social media posts will be compliant or not.
“In particular, the FCA has warnings for ‘finfluencers’, who are often dishing out advice on social media even if they don’t have a commercial arrangement with a finance company. The regulator is reminding these finfluencers that they could face up to two years in prison and an unlimited fine if they break the rules. The surge in support and information online when it comes to finances and investing can provide a real helping hand for newcomer investors. These finfluencers can help to explain key concepts like compounding and the importance of saving for the future in an engaging way, that could in turn enable people to make better-informed financial decisions.
“But there is a darker side to many of these posts, and a significant risk of finfluencers spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks, without properly explaining those risks. There’s a real danger that financial social media becomes a Wild West, rather than a space to get accurate, clear information on financial planning.”
