April 21, 2022 Julie Hyslop

Social Media and Unlicensed Financial Advice

“Receiving advice from a qualified professional is almost always going to be a better option than trusting an amateur dishing our stock tips in a video synched to the latest rap tune”
Aleks Vickovich, Wealth Editor ~ Australian Financial Review March 22,2022

ASIC (The Australian Securities and Investment Commission) is concerned about the unlicensed financial advice that is being posted by ‘Finfluencers’. Most influencer’s post information and advice about money and investing on a variety of social media platforms, however they usually do not have a financial services license.

It is not only ASIC who is speaking out about the dangers of unlicensed financial advice and social media content, Judith Fox, CEO of Stockbrokers and Investment Advisers Association has also welcomed more stringent compliance regulations for ‘Finfluencers’, pointing out that investors have absolutely no recourse if they are burned by the advice given.

A worrying trend has developed where some ‘influencers’ will talk about stocks that they themselves own, their followers will then buy the stock themselves at a higher price, and then the ‘influencer’ will sell their stock at the higher price, leaving others with worthless stock! This practice is now known as ‘pumping and dumping’. Further, many are paid by financial services organisations to promote their products and services and they are under no obligation to disclose conflicts of interest or the fact they are getting paid to promote or advertise products.

When comparing unlicensed and licensed financial advice it should be noted that all licensed advice is given by individuals who have a relevant bachelor’s degree, and often further specialist training, subscribing to arduous licensee training, compliance, insurance and dispute resolution requirements.

It is the Law that financial advice is only given by a licensed financial adviser whose clients have access to the Australian Financial Complaints Authority and ASIC, who will ensure compliance and auditing obligations are meet. Accountability for stock and investment advice can be enforced when dealing with a licensed financial adviser.

On the other side of the equation, those giving financial advice on social media platforms who are not licensed are breaking the Law but it is often difficult for ASIC to hold them accountable for the financial advice they are giving, which allows for very little readdress for those investing their money based on this online advice.

At Income Solutions, we believe that obtaining compliant and specialist expertise to create wealth is key to ensuring the money you invest is appropriate to your individual circumstances and goals, is secure and invested for maximum returns within the principals of best practice.

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