James Kaufmann, corporate partner at Hill Dickinson, discusses the FCA’s decision to target unregulated financial influencers and how this could potentially impact financial advisers and their clients.
In recent years, financial influencers – or “finfluencers”- have become increasingly popular, and if you’ve spent any time scrolling through Instagram, TikTok, or YouTube lately, you’ve probably come across them. These social media figures, often without formal qualifications, share investment tips and strategies with large audiences, many of whom are young, inexperienced investors. Finfluencers seem to have all the answers to building wealth, stock picks, and crypto trends. Their well-polished posts and videos make investing look easy, even fun, with promises of high returns. But behind the glamour and hashtags, there’s a real risk brewing.
The UK’s Financial Conduct Authority (FCA) has now launched a targeted action against finfluencers operating outside the law by promoting financial services products illegally, after an increasing number of young, impressionable people are succumbing to these scams. Finfluencers have become a popular source of investing information for Gen-Z retail investors over the age of 18. But these finfluencers are usually not professional advisers, and their messages often do not come with the risk warnings and approvals from the regulated industry. These actions are not just about protecting consumers; they are also essential for maintaining the integrity of financial markets.
Why is the FCA’s crackdown so important and long overdue?
In the age of social media, the appeal of slick, bitesize and light-hearted financial information is huge. The prevalence of finfluencers signals that financial advice is becoming more accessible, yet this new demand is not being met by experts who are qualified, experienced, or even have any expertise at all.
The ubiquity of social media means that anyone can claim to be a finfluencer, regardless of skills or experience. The quality and reliability of content varies greatly, and there are individuals exploiting the platform to sell inappropriate courses or products or make false claims about their financial success. Social media rarely respects geographic borders, and existing regulatory infrastructure is struggling to cope with it.
The promotion of unregulated financial products is diluting the advice of qualified, regulated advisers and can lead to market instability. When these unregulated products become popular, they can create bubbles, where prices are driven up artificially. These bubbles are inherently volatile and can burst, leading to sudden and sharp market declines.
While the general rules of the FCA apply to anyone who promotes financial products in the UK, there are no specific laws around “finfluencing” in the UK. So, whilst finfluencers need to ensure that their posts need to be fair, clear and not misleading, and may themselves need to be FCA-authorised, there has – until now – been little evidence of regulatory appetite to take action against finfluencers who claim insurance of the rules or simply flout the law.
What are the key takeaways for financial advisers and their clients?
Unregulated financial advice often involves exaggerated claims, which can overshadow the more balanced and professional advice provided by regulated advisers. When consumers face these unrealistic promises from unregulated sources, it can erode their trust in the financial advisory industry overall, making it harder for legitimate advisers to build relationships and provide sound guidance.
It may be difficult to see how financial advisers can compete with the free and accessible content that finfluencers produce online and reach the number of viewers that they can. However, the crackdown on finfluencers could enhance the reputation of regulated financial advisers.
It highlights the importance of professional qualifications, experience, and regulatory oversight in providing financial advice. This comes as finfluencers are facing increasing public scrutiny. In the UK, impending trials of several reality TV “stars” accused of promoting an alleged unauthorised trading scheme on social media are scheduled for early 2027. Beyond the UK, the BBC are investigating social media star, Logan Paul, for allegedly misleading and exploiting fans over crypto investments for huge profit.
For investors, the takeaway is to be circumspect about who you listen to and always verify the credibility of any financial advice you receive online. Be cautious of investment schemes promising high returns with low risk, especially those promoted on social media. If it sounds too good to be true, it probably is. If in doubt, consult a regulated financial adviser or check the FCA’s website to see if the individual or firm is authorised.
