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If you open Twitter, Facebook, LinkedIn or YouTube, you are likely to come across an influencer who will be telling you where to invest, where not and what to do with your money and what not. In recent years, a new breed of influencers has emerged on social media platforms, attracting a growing number of followers seeking financial advice and knowledge and they are called ‘finfluencers’ or Financial Influencers. These individuals have garnered significant attention due to their alleged expertise in finance and their ability to connect with the audience.
These are individuals who have established a strong presence on social media platforms, primarily focusing on finance-related topics. They might pose or not have a background in finance, economics, or investment but they leverage their knowledge and experience to provide critical insights, tips, and guidance to their followers. Finfluencers employ various formats, including videos, podcasts, blogs, and social media posts, to disseminate financial information in an engaging and easily digestible manner.
People are increasingly turning to finfluencers for financial advice. One key trait of finfluencers is that they make complex financial concepts accessible and relatable. They utilize their platforms to break down intricate ideas into easily understandable terms, catering to a broader audience and that is where they impress their audience.
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Finfluencers bridge the gap between traditional financial education and ambiguity around those topics by breaking down complex concepts and providing education that is easy to comprehend and apply in everyday life. Their practical approach to finance helps demystify the subject, empowering their followers to make informed and better financial decisions.
According to experts, while finfluencers are playing a critical role in making finance-related topics easy and intelligible, they also enable their audience to make an informed decision most of the time. “Finance sounds a bit intimidating, sometimes people get lost in the jargon. Short-form content like reels or shorts gives information in bite-size pieces by incorporating real-life examples and a relatable approach. Finfluencers help viewers comprehend and apply financial principles more effectively.” Shares Partho Dasgupta Ex-CEO of BARC India and Presently Managing Partner, Thoth Advisors.
While there is no doubt that there have been rising instances of finfluencers turning into a menace or advocating a wrong cause, the whole social media game of finfluencers are based on trust and authenticity. Many of them build trust by openly sharing personal stories, including their successes and failures. This transparency creates a sense of connection and reliability, leading followers to perceive finfluencers as credible sources of financial information. The personal touch and willingness to be vulnerable enhance the trust factor, which is crucial when seeking financial guidance.
SEBI Guidelines and Pushback:
As the popularity of finfluencers continues to surge, regulatory bodies like SEBI have started paying attention to their activities. SEBI is actively working on developing guidelines to regulate finfluencers and ensure investor protection. The key concerns that have prompted regulatory scrutiny are primarily focused on preventing misinformation and unverified advice from being propagated. However, while there are many genuine influencers out there on social media, the platform has also been plagued by many alleged finfluencers.
“With numerous financial influencers offering advice, there is a risk of unsubstantiated claims being made, which could mislead investors. SEBI should address this by establishing guidelines that require finfluencers to substantiate their claims and disclose any conflicts of interest they may have,” said Dasgupta.
Another area of concern is the potential for conflicts of interest arising from partnerships between finfluencers and financial products or service providers for promotional activities. While such collaborations can bring transparency and valuable insights to the audience, clear guidelines are needed to prevent potential conflicts of interest and safeguard investors’ interests.
SEBI is particularly focused on investment recommendations provided by finfluencers. The proposed guidelines aim to ensure that investment advice is backed by appropriate qualifications and expertise. Moreover, it is essential to adequately communicate the risks associated with investments to the audience, ensuring that followers are well-informed before making any financial decisions based on the recommendations of finfluencers.
The emergence of finfluencers has revolutionized the way people consume financial information and seek advice. Their accessible and relatable approach has democratized finance, empowering individuals to take control of their financial well-being. However, regulatory bodies like SEBI recognize the need for clear guidelines to maintain transparency, credibility, and investor protection in this evolving landscape. Striking the right balance between the benefits of finfluencers and the need for regulation will be crucial to harnessing the potential of finfluencers to promote financial literacy while ensuring the integrity of the information they provide.
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