The Financial Conduct Authority (FCA) has published new guidance relating to memes, reels and gaming streams that promote financial services.
With more consumers turning to social media for financial advice, the FCA warned that as a result of this emerging trend, poor quality financial promotions on social media could lead to significant consumer harm due to their wide reach.
According to the financial watchdog, financial promotions on all advertising channels should be “fair, clear and not misleading,” in an effort to further support consumer understanding.
It also urged firms utilising social media to provide a “balanced view” of the benefits and risks, and clearly communicate information that will help consumers make effective, well-informed decisions.
It said: “Influencers are reminded that promoting a financial product without approval from an FCA-authorised person with the right permission could be a criminal offence.”
Reaction:
Hannah Bashford, director at Model Financial Solutions:
“Some ‘finfluencers’ are terrible for the industry and it’s about time this was addressed, but with so much ‘noise’ out there, how are the FCA going to crack down on this?
“We see many people promoting products and services who clearly do not have any experience or technical knowledge, giving incorrect information and views that, if followed, could be financially detrimental.
“Financial services promotions can be boring because of all the regulation but it is there for a reason, to protect people from financial harm.”
Justin Moy, managing director at EHF Mortgages:
“With the popularity of these platforms for finance advice, it is hugely important that the FCA deal with this swiftly.
“Clearer guidance would make a huge impact and more importantly, those videos that are blatantly disregarding the rules need to be taken down, and fines or bans given to those who continue to misinform the general public.
“People believe everything they see online.”
David Sharpstone, director at CIS Mortgage Advice:
“As a regulated adviser, I find it frustrating to see these so-called ‘influencers’ commenting and giving pseudo-advice.
“Huge amounts of capital are often at risk, and to the general public it’s easy to make assumptions that a popular personality on social media or TV has the qualifications, experience, and PI cover to back up their claims.
“Lack of warnings, and false information are the biggest problem to be tackled by the FCA. Martin Lewis, Watch out.”
Tracey Dixon, broker at Pure Mortgage and Protection:
“The FCA’s latest guidance on financial promotions is a positive step towards protecting consumers from misleading information.
“Misinformed consumers getting incorrect financial advice online can lead people to make poor decisions about their finances, potentially impacting their ability to secure mortgages or investments.
“Social media often paints an unrealistic picture of financial success.
“People may see quick fixes or guaranteed returns, setting them up for disappointment when reality doesn’t match the hype.
“It can be frustrating for qualified financial advisors to compete with misleading information online.
“Clients may come in with unrealistic expectations or incorrect assumptions based on what they’ve seen on social media.”
Rhys Schofield, brand director at Peak Mortgages and Protection:
“The FCA is very good at telling you what you can’t do based on pre-social media age rules, but with very little proactive guidance on what you can do, is it surprising that the void is filled, often by people with little regulatory oversight.
“The danger with the regulator’s approach to social media so far is that it’s so difficult to engage with a potential customer in clear, jargon free language that our hands are very much tied.
“A lot of compliance wording is just going to turn your audience off and send them to an alternative account that doesn’t have it.
“For example take sticking YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH REPAYMENTS ON YOUR MORTGAGE at the bottom of a post?
“Does it actually drive better outcomes or is it a bit pointless when it’s on every illustration and in every initial disclosure document?
“There is a huge appetite from the public for the content finfluencers are creating, so how about empowering those qualified to be better at it?”
Jack Saunders, managing director at Exonia:
“It’s brilliant to see the FCA release such thorough guidelines.
“Consumers face this growing issue daily on social media. This is a great first step.
“But, we need the FCA and ASA to enforce these rules for the many posts that break them.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“It’s about time the FCA got involved.
“There are too many people on social media giving financial advice that is incorrect or misleading.
“This in turn creates a problem for qualified financial advisers because the client thinks they can get a mortgage or investment, when they can’t, because they’ve seen it on Tik Tok.”
Dave Corbett, head of protection at Protection 1st:
“I say if anyone calls themselves ‘finfluencers’, they should strike ’em off for that alone.”
Charles Breen, founder at Montgomery Financial:
“FCA has flagged finfluencers’ ‘Wild West’ ways and is finally looking to stamp down on the rodeo of pseudo advice.
“This highlights the dangers of taking advice from social media and also highlights the dearth of financial education in schools.
“If younger people had a correct financial education, they wouldn’t be seeking out advice from cowboys as they do online.”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management:
“Social media is the Wild West of financial promotions. The financial promotion rules have been around from the birth of the FCA and financial service practitioners should be well versed in at least the high-level requirements of the rules.
“Which is why it is always shocking when you see such blatant and wilful disregard for them; do these people not know the rules they are governed by, or are they just so arrogant as to think that they won’t be caught and punished?
“Sadly, in many cases the latter is probably true; the FCA are always keen on issuing more and more rules, but there seems to be very little will or resource to police them, which makes for a very unlevel playing field, leaving honest firms who follow the rules effectively fighting with one arm tied behind their back, whilst the referee turns a blind eye.”
Michelle Lawson, director at Lawson Financial:
“All the time people are getting away with it this will continue.
“It is about time the FCA stop the chat and threats and take proper action and stop muscle flexing.
“Every day I see more and more of this happening and consumers are potentially making very detrimental financial decisions.”
