Financial advice you don’t need
Influencers promoting financial products warned to tread carefully.
“Be financially free.” “Escape the rat race.” “End 2021 with $100,000 in your bank account.” They’re some of the promises finance influencers tout to their thousands of online followers.
Also dubbed “finfluencers”, they offer tips and advice via social media on everything from cryptocurrency to investing in stocks.
Whether they have any financial expertise is another matter. Unless they’re licensed to provide financial advice, they also risk breaching the law and a fine of up to $200,000.
The Financial Markets Authority (FMA) has put finfluencers on notice they need to comply with financial advice rules, after concerns some might be overstepping the mark.
FMA chief executive Rob Everett said it was fine to talk about financial matters as long as it’s kept general.
“When you start getting into recommending particular products, like specific funds, stocks or insurance, or telling individuals what to do, that’s probably regulated financial advice.”
Everett also urged influencers to be cautious when promoting high-risk products, such as cryptocurrency and derivatives.
“Not only do these assets have a high risk of people losing money, they’re also often used as a bait in scams,” he said.
Last year, the FMA and the Commerce Commission launched a campaign to raise awareness about investment scams and pyramid schemes.
In December, the commission ordered influencer Shelley Cullen to stop promoting a cryptocurrency pyramid scheme called Lion’s Share. Cullen promoted the scheme to her followers as an opportunity to earn money. However, any revenue relied on the continuous recruitment of new “investors”. Pyramid schemes are illegal under the Fair Trading Act.