Being a social-media influencer used to be so much fun — and rewarding! Bash out a post about your lovely new shoes, favorite drink or hot new moneymaking scheme, and watch the likes and dollars roll in.
But some busybody always has to get involved.
Those fun sponges at Britain’s financial conduct regulator and its advertising watchdog are launching an effort to remind celebrities and online personalities that they have real-world responsibilities in what they promote — and a whole list of rules to follow. Aside from upsetting their fans, there are massive fines and even prison to worry about.
OK, to be absolutely clear: I don’t think the Financial Conduct Authority is being a fun sponge. Ensuring people have the best chance of making financial decisions that are suitable for them and that are not scams is self-evidently important. For the promoters themselves, being told they really ought to understand what they’re hyping and how they should be doing it is also valuable. And it’s definitely time the regulators show that they are taking this seriously — otherwise why would anyone else?
Celebrities have made a habit of stumbling into the costly and embarrassing quagmire of dubious crypto promotions in recent years. Reality TV somebody, Kim Kardashian, was fined $1.3 million by the US Securities and Exchange Commission last year to settle claims she broke rules when touting the EMAX token. She still faces a civil lawsuit over the affair. Meanwhile, Tom Brady, ex-husband of the supermodel Gisele Bundchen, and other famous people face lawsuits over their promotion of collapsed crypto exchange FTX.
In the UK, the FCA is launching a set of guidelines to clear up any grey areas about what finance firms, celebrities or any kind of “finfluencer” should be saying and doing on social media. Its money police are spending a lot more time looking at Facebook, TikTok and the like to catch people pitching stupid or dishonest things.
Already this year, the FCA and Britain’s Advertising Standards Authority created a seven-point checklist for finfluencers to educate them about what was involved in boosting financial services online, partly targeting those who might not even know the FCA exists. It gets them to ask questions such as: Do you realize you could be breaking the law? Or that you could actually go to jail? Do you really understand what you’re talking about? I’m paraphrasing, but that’s the meat of it.
Social-media advertising is worth about one-third of all internet advertising spending in the UK, the FCA said in a 28-page consultation document that the finance industry and agents representing online promoters will get to offer feedback on. The FCA is antsy because there has been a substantial rise in people using social media to promote investment and credit products, often high-risk or high-cost, and mainly targeting young people. This overlaps to a degree with even bigger problems of digital finance cons, where British people are among the world’s most targeted.
More than 60 percent of 18-29 year-olds follow influencers and three-quarters of followers trust their advice, the FCA wrote in its consultation document. Finfluencers’ reach has drawn finance firms increasingly to use online personalities to promote products.
“Often these influencers have little knowledge of what they’re promoting,” the FCA wrote. “This lack of expertise is reflected in the large number of promotions that are either illegal or non-compliant, making it likely that consumers will see poor quality information on social media.”
The regulator has been posting its finfluencer checklist as an infographic on various platforms for a while. It has also been working with an influencer trade body comprised mainly of the endorsement agents that help arrange the deals. It promoted the work with the help of a woman made famous by appearing on the TV show “Love Island,” where a bunch of twenty-somethings go on holiday looking for romance and are constantly watched by cameras.
Still, it is bound to take a while to get the message across and rein in bad practices. To really improve pitches to those chuckling at the videos and memes, the online platforms will have to do their share of monitoring and moderation, too. Britain’s forthcoming Online Safety laws will put more onus on those companies to weed out illegal financial content. That means scams but also could cover the promotion of high-risk products, such as binary options.
All this is a good reminder that making money is never that quick and easy, no matter how influential you are.
Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Views are personal and do not represent the stand of this publication.
Credit: Bloomberg
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