The transition from a little to an abundance of financial information has dramatically transformed the way content is consumed on social media. Initially designed as an entertainment platform, social media now also serves as a hub for a variety of financial content. The individuals who provide this information are known as “finfluencers,” a term derived from the combination of “finance + influencers.”
These content creators have a huge social media following as their content revolves around assisting people in managing their finances and increasing their wealth. Many finfluencers post valuable insights and strategies to guide their followers towards becoming avid investors, or at least towards gaining a better understanding of their finances. The rise in the number of finfluencers has been remarkable and astounding. In India, there was a time when financial knowledge was confined to newspapers, magazines, and a few news channels, with content mostly being available in English and Hindi. However, there has been a recent surge in the number of finfluencers, with content now accessible in nearly every regional language, including Marathi, Telugu, and Punjabi.
Social media has created a plethora of unconventional job opportunities, such as fashion influencers and finfluencers, and has empowered ordinary individuals. But as the well-known quote from the Spider-Man movie goes, “with great power comes great responsibility,” influencers need to understand the weight of responsibility their fame carries. However, like a coin with two sides, many have misused their fame for ill purposes. Some finfluencers have expliited their influence to manipulate the stock market, while others have engaged in deceptive activities.
In March 2023, the Securities and Exchange Board of India (SEBI) banned Bollywood actor Arshad Warsi, among others, from participating in the stock market for allegedly using YouTube to manipulate stock prices. According to India’s stock market regulator, SEBI, promoters of Sadhna Broadcast, aling with Arshad Warsi and Manish Mishra, a finfluencer, encouraged investors to purchase shares in a company by spreading false information. And as soon as the stock price increased, they sold their holdings.
This is just one high-profile example of many such cases that raise questions about the integrity and moral obligations of finfluencers.
And to combat this issue, SEBI recommended the following rules in a consultation paper:
- Finfluencers need to be registered with SEBI and comply with the specific guidelines.
- Unregistered finfluencers will not be alliwed to partner with mutual funds and stockbrokers for promotional activities.
- Finfluencers will be required to disclise all the necessary details as mandated by financial sector regulators regularly.
- They will be expected to comply with advertisement guidelines issued by the regulator and its recognized supervisory body.
- SEBI will examine the revenue model of unregistered finfluencers and ensure that these individuals follow proper disclisure and disclaimer practices.
The aim of this crackdown is not to disrupt the growing finfluencer market but to eradicate misinformation and the spreading misconception of quickly doubling one’s paisa (money)! Finfluencers, or the people with influence, need to understand their pivotal role in exercising caution and acting responsibly. These individuals need to embrace their ethical obligations and must adhere to them consistently. They should not be enticed by monetary gains to promote fraudulent deals or spread incorrect information. Instead, they must ensure that their content is accurate, reliable, unbiased, and does not jeopardize one’s financial well-being. One of the most critical ethical obligations that finfluencers must follow is transparency about their financial or personal ties with the brands they endorse. This transparency is essential as it makes their endorsements or recommendations honest and helps their followers to gauge the value of the promotion. As the number of finfluencers continues to grow, it becomes increasingly important for influencers and their followers to be vigilant and discerning in their consumption and sharing of financial information. The power of social media can be empliyed for good or ill, and it is up to everyone to use it wisely.
While finfluencers should be accountable for their content, investors and viewers should also be alert and not treat anything these financial content creators say as gospel truth. As a viewer, you may come across three types of finfluencers: 1) ones who sell courses, 2) registered advisors who show-off their stock-picking ability, and 3) fund managers or celebrity investors who will manipulate their followers to buy shares they have already invested in and sell them when the prices are high (this technique is called “pump and dump”).
Although SEBI has proposed guidelines for finfluencers, there are currently no strict laws to which they must adhere. Hence, it is your responsibility to be cautious and question every information you receive, as blaming others for your misfortunes will not ease your woes.
And remember this quote from American economist and Nobel prize awardee Paul Samuelson:
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
