Social media ‘finfluencers’ face tough new rules, as the regulator aims to improve the way that financial products are promoted online.
The regulator says its proposed new rules are designed to improve consumer safety by combating “illegal and non-compliant financial promotions”.
The rules are outlined in new social media guidance, which will state that promotions of financial products need to be clean fair and not misleading.
The guidance also states that these promotions need to be ‘balanced’ include details of risks as prominently as those of the rewards. These rules cover a range of social media content – including memes.
The regulator added that it has increased its scrutiny of online financial promotions, particularly by ‘finfluencers’ who often market illegal products to their followers. There has been particular concern about promotions for new asset classes such as crypto-currency and buy-now-pay later schemes.
Many of these have been designed to appeal to younger consumers, and those who may have found their finances hit by the cost-of-living crisis.
This ‘finfluencers’ term is given to those with large online followings who may promote specific financial products or services. In some cases they made be paid to do so without making this financial incentive apparent to their audience.
FCA director consumer investments Lucy Castledine 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.”
Many in the financial services industry welcomed this update to FCA rules.
Hargreaves Lansdown head of personal finance Sarah Coles says: “The Wild West of social media ‘finfluencers’ has received a warning shot from the FCA. Among the guidance is a reminder that some of these promotions can actually constitute a criminal offence.
“In a world where would-be crypto-currency investors have received tips from Kim Kardashian, and memes promoting Buy-Now-Pay later schemes, it has seemed as though anything goes. The FCA says it has seen a growing number of ads falling short of existing guidance, so this is an effort to clarify the rules, and then start taking people to task.
She adds: “There’s an awful lot to welcome in these rules. Clearly they should be fair, clear and not misleading. They need to be balanced – so they don’t just highlight the potential benefits of a product but the relevant risks too. And the risks can’t just be hidden away in small print, or on links you need to click on to understand.
“The clampdown on bad actors is vital, in order to help people save and invest with confidence. However, for responsible businesses doing the right thing, the challenge will be to implement rules that provide the right balance between offering the best information to help people make informed decisions, and offering it in a format that they will actually want to read. The pension example in the consultation, for example, isn’t going to do an incredible job of building enthusiasm for investing for the future.”