In its latest guidance for memes, reels and gaming streams promoting financial services published on 26 March, the FCA set out how adverts across social media channels must be “fair, clear and not misleading, meaning they must have balance and carry the right risk warnings so people can make well informed financial decisions”.

And given that social media has become a central part of firms’ marketing strategies, and firms are on the hook for all their promotions, the FCA has warned they need to ensure influencers they work with communicate to their followers in the right way.

“Influencers are reminded that promoting a financial product without approval from an FCA-authorised person with the right permission could be a criminal offence. Consumers need to be alert to dubious adverts and scams online, but it is important that influencers ensure they’re on the right side of the rules and consider what would happen to their own reputations if they’re found to promote products illegally”, the statement said.

Lucy Castledine, director of consumer investments at the FCA, said: “Any marketing for financial products must be fair, clear and not misleading so consumers can invest, save or borrow with confidence.

“Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”

Social media will not always be the best place to promote complex products, the FCA added.

“Firms need to consider whether a platform that offers limited characters or space is the right place to do so. Scrutiny of financial promotions has been ramped up and last year we removed over 10,000 misleading adverts, up from around 8,500 in 2022.”

In industry reaction, Suman Rao, managing director for the UK and Ireland at Avaloq said: “Social media is still something of a Wild West when it comes to financial services. While it can play a role in broadening the reach and appeal of beneficial financial solutions, it also brings risks if promotions and other communications are not sufficiently regulated.

“According to our research, over a quarter of UK investors consulted social media for investment advice (27%) in 2023, a four-percentage point increase on 2022 (23%). Yesterday’s guidance from the FCA is therefore a welcome development.

Rao added: “Financial advice can be complex, and it is vital that finfluencers do not oversimplify it on their social media channels. This highlights the important role of established financial institutions in ensuring high ethics and trust in today’s digital era, and thanks to their prudent approach to marketing and their robust rules around financial promotion, these firms now have the advantage of already adhering to the standards set out by the FCA.

“These guidelines will help establish the necessary regulatory framework for a social media sphere which better protects consumers. We look forward to seeing how this guidance develops to create a fairer and safer environment for people engaging with financial service providers online.”

Laura Suter, director of personal finance at AJ Bell, said: “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.

Suter added: “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.”

Earlier this year, on 26 January, the CFA Institute, the global association of investment professionals, published a  report, ‘Finfluencer Appeal: Investing in the Age of Social Media‘, which revealed that insufficient financial literacy, limited interaction with regulated financial advisers, and a preference for obtaining information through digital platforms, was driving Gen Zers to engage with finfluencer content.

Rhodri Preece, CFA, Senior Head of Research, CFA Institute said about the report: “Finfluencers now play an increasingly significant role in educating young people about finance, with accessible content that is both informative and engaging. However, our research shows that finfluencer content often lacks sufficient disclosures, which can hinder the ability of consumers to evaluate the objectivity of the information, and some investors may be unaware when and how finfluencers are being paid to promote financial products.”

“Differences in definitions across markets for investment recommendations means complexity for finfluencers and a grey area for consumers of their content. Some finfluencers may be unaware that their activities are regulated and need appropriate disclosures. We urge regulators to consider a universal definition of an investment recommendation, and firms and social media platforms should work with finfluencers to ensure compliance with applicable policies.”

The research identified key characteristics of finfluencer content through an original analysis of content on TikTok, YouTube and Instagram in the United States, United Kingdom, France, Germany, and the Netherlands.

Across the content reviewed, 45% offered guidance (content that provides general information about investments but does not recommend a particular course of action), 36% included investment promotions (marketing and advertisements of investment products), and 32% included investment recommendations (content that recommends a specific course of action), Just over half (53%) of content containing a promotion included a disclosure, compared with 20% of content containing a recommendation. 27% of content included an affiliate link.

Ignacio Ramirez Moreno, CFA, successful LinkedIn finfluencer added: “Many finfluencers inadvertently provide financial advice that may be subject to regulatory scrutiny or that violates applicable laws. Their intent to demystify finance frequently brushes against regulatory barriers, blurring the line between casual unregulated investment ideas and regulated financial advice.”

“These create not only legal risk to the finfluencer; they also pose potential harm to the followers acting on their guidance. The consequences can be particularly severe for those lacking in-depth financial literacy who place unwavering trust in the guidance of finfluencers. As such, the call for a harmonized regulatory framework that guides cross-border finance conversations on social media is loud and clear.”

Some 16% get investment ideas from Facebook, with 14% using Reddit.

This is in contrast to the over 55s with only 1% using Facebook and 0% using Instagram or Reddit.

Across all age groups the majority got their investment ideas from websites of financial companies.

The data also found that women are more likely to ask friends and family for ideas and guidance, while men and investors aged over 35 prefer to trust their own judgement.

Emma Wall, head of investment analysis and research at Hargreaves Lansdown, said: “Regionally there are few differences – most investors across the UK prefer the same sources for ideas – although people in the East Midlands at 39% and London at 33% trust friends and family for investment ideas far more than those in Wales and the West Midlands at just 17% and 11% respectively.

“Of course, the most important factor when looking for investment ideas regardless of your source is that they are right for you, and your personal financial plan. Those readying themselves for retirement probably shouldn’t be invested in the same portfolio as a Gen Z investor who is in their first job.”

This survey follows a Financial Conduct Authority (FCA) report which found young Brits are 18% more likely to be influenced by social media when making investment decisions than in their dating choices.

The new guidance, which is subject to an eight-week consultation period, will reflect how social media is currently used to promote financial products online, the regulator said.

In recent times, the FCA has ramped up its scrutiny of online financial promotions and in particular the role of financial influencers or ‘finfluencers’.

Younger consumers are likely to trust the information provided to them by influencers on social media, the regulator said. However, promoting a regulated financial product without FCA approval can be a criminal offence.

Lucy Castledine, FCA consumer investments director, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.

“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online. And for those touting products illegally, we will be taking action against you.”

The FCA has also partnered with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products.

Interactive Investor senior personal finance analyst Myron Jobson welcomed the consultation, labelling the rise of ‘finfluencers’ a “headache” for the FCA.

He added: “The credentials of many so-called finfluencers are weak at best – if they exist at all. But there are also a number of well-versed and highly qualified financial professionals on social media offering solid guidance.

“Meanwhile, it is difficult to use the internet without encountering something that looks like a scam advert. And there are also malicious ads that aren’t easily discernible, which makes surfing the web a minefield.

“The difficulty for the uninitiated is sifting the wheat from the chaff. The concern is those who experienced a baptism of fire by losing money by making risky investments after seeing a misleading or scam ad could be put off investing for life and scupper financial goals.”

Rosie Hooper, chartered financial adviser at Quilter, said: “With its new consultation on financial promotions, the regulator is making it harder for promotions to be approved and is cracking down on harm occurring from unauthorised influencers communicating illegal financial promotions via social media.

“This is long overdue given the spate of social media posts over a number of years that have lured people into high-risk schemes that don’t state the real risks of falling victim to scams on social media which have skyrocketed over recent years.

“This crackdown is particularly needed during the cost-of-living crisis as people are more likely to turn to alternative sources with the promise of high returns being tempting for cash-strapped individuals without their eyes open to risks involved.”

For more insight on UK wealth management, please click on www.portfolio-adviser.com

• Maintaining a solid online presence is important; and quickly becoming imperative; and
• Maintaining a solid online presence is, oftentimes, a royal pain in the proverbial.

The cumulative build-up of seeing the ubiquity of competitors online, LinkedIn ninjas charging tens of thousands for a lead generation diagram and the still-pending, herculean task of finally updating the website you Asked Jeeves to help with in 2004 can leave even the most organised, tenacious of humans ready to stick pins into their own face, writes Aimee Speight, founder of IFA-focused firm Speakeasy Communications.

With new social media networks, websites and online tools popping up more frequently than Whack-a-Mole, it can be challenging to keep up and know where to focus your precious time; not least on top of servicing your existing book, managing daily operations and generally trying to exist as a functioning professional in a world where a lettuce outlasted a prime minister.

And yet we can’t overlook the impact of digital communications; its importance having only been exacerbated since the stream of global lockdowns. Clients and prospects are increasingly turning to the internet to research the products and services they need, or to check the credentials and expertise of their potential adviser.

If you’re not visible, you’re missing out on valuable business opportunities; be it from a potential commercial partner, journalist, investor or client. Worrying. Not to mention that if you are visible, your online footprint must be impeccable.

It’s not all treacherous though. There are strategies that you can implement to make sure that you’re creating an online presence that audiences value and yields results.

Choose your social media platforms wisely

There are countless numbers of online platforms available, but it’s neither practical nor necessary to try and generate 100,000 followers across all of them.

Instead, focus on the platforms that are most relevant to your target audience and align with your strategic goals.

LinkedIn is a great platform for financial advisers to build connections with industry peers, engage with potential clients and showcase your expertise.

Or if you’re working to integrate within your local community through events and sponsorships, Facebook can also be useful.

Create engaging content

This one usually elicits a glazed look from advisers at best, and a world-weary sigh at worst. Who has the time, right? But here’s the thing – it doesn’t need to be complicated.

Odds are, you’ve earned your stripes in your field of expertise. Now tell people about it.

Write blogs, share blogs; pen articles, get comfy behind the camera and start talking to your audience about investments, savings plans, pension tips and bitesized advice. Share your insights, share your information.

Whether it’s on social media, podcasts or guest blogs, either tool up or outsource because your competitors are already out there building communities and client bases online.

In the digital age, content is no longer a ‘nice to have’.

Get thrifty

If Dexy’s Midnight Runners can dine out on Come on Eileen for nearly 40 years, then you can make that superb article you wrote go further.

Rope a designer in, chop it up into an infographic, a video, a social media post – contrarily, expand it out into a longer thought leadership piece.

Get your content working for you and get recycling.

Modify

I want you to park the industry mantra of ‘diversify, diversify, diversify’.

Nobody panic, it’s just for a moment. Instead, let’s think ‘iterate, iterate, iterate’. Monitor the content you’re putting out, measure it and if you need to, modify it.

There are a number of free tools online to help you track your website traffic, social media engagement and other key metrics; see what’s performing for you. If it’s not performing, stop, evaluate, adjust and try again.

Be human

At a time when there is more ridiculous and dangerous misinformation online along with an undercurrent of worry among consumers that robots are taking over the world with AI, we could all stand to benefit from a little more authentic human connection when it comes to talking to people about their finances.

Engage with people who reach out on your social media and incorporate your own personality into your digital communications. It puts clients at ease, it breaks the tension with third parties and immediately you start to cut through the noise. Ease up on the jargon and remember that people buy from people.

It takes some considered planning, along with consistent effort to develop, but creating and maintaining authentic digital communications is the cornerstone for IFAs looking to develop their prospects.

While it can be challenging to build effective digital communications, when you master the basics of creating your online presence and put the time in to do so, you’ll harvest greater opportunities for your business and watch that growth trajectory soar.

This article was written for International Adviser by Aimee Speight, founder of IFA-focused firm Speakeasy Communications.

Research by the Cyprus Securities and Exchange Commission (Cysec) of retail investors in the UK, France, Germany and Cyprus found that less than half (42%) investigate and look into the investments they are being recommended.

Some 37% rely on recommendations made by family and friends, 31% seek financial advice and 22% make investment decisions based on digital promotions or celebrity endorsements on social media.

Geographically, French investors were the most likely to seek financial advice (48%), followed by 34% in the UK and Germany. British investors, however, were more likely to make investment decisions based on online promotional content (24%), compared to those in France or Germany (14%).

Fin-fluencers

Cysec is worried by the role social media is playing within the retail investment space.

Its research revealed that nearly a third (31%) made financial investments based on the ‘advice’ of a financial influencer.

While the French were the most likely to seek financial advice, they are also more likely to follow an influencer’s recommendations (40%), compared with 34% in the UK, 26% in Cyprus and 24% in Germany.

And at the same time, the information provided online is taken at face value by too many investors, with just a quarter having reported spending nearly a week researching a particular product, while 7% took less than 30 minutes before committing money to an investment.

When it came to checking whether a firm had all the right licenses and authorisations, only 30% checked the website of their local regulator. More than half (51%) only looked at company reviews or on the firm’s own website (44%), while 15% did no checks whatsoever.

From a geographical standpoint, UK investors were the more likely to check the regulator’s website (42%), followed by Germany (32%), France (26%) and Cyprus (18%).

Additionally, French investors were also the least likely to check the status of an investment firm (22%).

Overly risky

Another worrying trend that came out of Cysec’s research was that a growing number of retail investors are committing more money than they can afford to lose to investments. This was true for 26% of respondents.

The proportion was higher in France (32%) and lower in Germany (24%) and Cyrpus (18%). Over a third of those polled (34%), however, regretted the investment they had made; this was especially true for 38% of UK investors.

A spokesperson for Cysec said: “Social media now has a direct influence on investment decisions, but not all the information can be trusted. Too many investors including young people are taking real risks with their money because they are taking advice and recommendations from unreliable sources, ranging from family members and friends to celebrity endorsements on social media platforms, without properly checking out the entity they’re buying from.

“This is an area where regulators can and should play a much greater role to enhance their ability to protect investors. The patterns identified by our survey were identified across a range of countries and investor groups, demonstrating an opportunity for national authorities to work together to raise awareness of the tools available to investors and to signpost information that will help them make informed decisions.”