With celebs from Towie and Love Island charged with promoting unauthorised trading schemes recently, RSM UK asks: “Do celebrities have a legitimate role in improving financial literacy?“
Delving into some of the challenges in today’s digital world, Angela Toner, corporate finance partner, RSM UK and Hugh Fairclough, audit partner, RSM UK, share some useful and practical tips on how you can sharpen up your own use of social media within your advice business to be more effective and impactful.
Financial advice comes in many forms, not all of them legitimate. Getting good advice is vital, and the debate on the boundary between advice and guidance rolls on. Proper, regulated advice comes at a cost to the consumer, and for those people who can’t afford it, or simply don’t want to pay, who do they turn to?
Traditionally, financial education and advice has come via established and trusted financial service providers, and of course trusted friends, family and peers. We listen to people and brands we trust and have a personal connection to.
For younger consumers, recent research from Intuit Credit Karma highlighted more than a third (36%) of Gen Z use TikTok for financial advice, compared with less than a tenth who said they’d turn to a financial services provider. With this in mind, should financial service providers be harnessing the pull that celebrities on social media have more, involving them in legitimate promotions to inform and educate the hard-to-reach Gen Z audience?
Social media is a significant part of today’s culture, particularly for younger generations. This medium and its use of celebrity endorsement has long since been successful in generating sales in other industries such as fashion, beauty, music and travel. A strong digital brand is inevitably going to become increasingly important to all industries, financial services included.
That said, it’s impossible to avoid repeated news articles and Martin Lewis reminders highlighting that ‘you can’t trust everything you see online’, even if it’s something a famous face or seemingly expert finfluencer is endorsing. If something looks too good to be true, it probably is.
Fake adverts and accounts are rife on social media platforms and the latest statistics outline just how serious the problem is. A Freedom of Information request submitted by Good Money Value to the National Fraud Intelligence Bureau (NFIB) revealed the largest number of scams reported in 2022 were on Instagram (1,857) and Facebook (1,193), both owned by Meta. In third place was YouTube, with 231. The total loss in 2022 of almost £75 million was nearly six times higher than in 2019, but it’s worth remembering that these figures only relate to the cases that were reported. The scale of unreported scams is difficult to quantify, but we do know the problem is growing.
So how does the industry bridge this gap, to reach an online audience appropriately, without falling foul of the FCA’s requirements for financial promotions?
Your average person isn’t going to know what the Financial Services and Markets Act is. That’s for professionals and authorised individuals to understand.
The challenges our industry faces are threefold; Firstly, there are the regulated firms who are using influencers on social media and must be regulated and compliant. Then there are unauthorised individuals, who may well be promoting real schemes, but without the appropriate warnings or understanding. Then thirdly you’ve got fraudulent schemes and scams. As an industry, we need to address all those areas, and the building blocks are now slowly being put in place to do that.
One of the building blocks is the FCA’s work on this. The Financial Services and Markets Act has been updated, and they’ve published new guidance. Under the Financial Services and Markets Act 2000, a person must not communicate any financial promotion unless it’s approved by an authorised person. Those breaching the rules can face up to two years in prison and unlimited fines.
Another building block to tackle the issue was the introduction of an Online Safety Bill, which now includes rules that social media platforms must take down illegal financial promotions, but that will likely take time to be fully effective. FCA data (Financial promotions quarterly data 2024 Q1 | FCA) shows 2,211 financial promotions were amended or withdrawn by authorised firms in Q1 2024. It’s difficult to quantify how many unregulated promotions there are.
The third building block was the introduction of rules by the payment systems regulator to help repay people who have been victims of scams and fraud. The updates provide some welcome clarity as to the form of Mandatory Reimbursement, but questions and concerns remain. Payment Services Providers (PSPs) will have to move at speed to design new Mandatory Reimbursement systems and processes before implementation is due on 7 October 2024.
Regulated advisors bring expert awareness of the financial promotion rules and so are ideally placed to improve the current situation. Regulated firms have a part to play to help spread awareness and improve financial literacy by using influencers who do comply with regulations. It’s important to remember there’s a big difference between giving financial advice and improving financial education. Financial education might include helping people to navigate financial jargon, budget, calculate a tax liability, understand the power of compound returns or the risks associated with different asset classes. Education should cover the basic foundations that enable a person to make more thoughtful and informed decisions. Investment advice is likely to include recommendations, which would require knowledge of individual circumstances and is unlikely to be appropriate for a mass social media audience.
For some advisers running smaller firms, social media and appropriate finfluencers can be difficult to utilise. Hiring celebrities demands large marketing budgets that smaller advisers are unlikely to have.
Large firms have big marketing departments which can take care of the social media side of things and ensure the content being put out complies with regulations and has all the appropriate messaging and warnings.
For smaller firms that don’t have a dedicated team for this social media may seem like one more thing they need to think about. There’s a host of additional responsibilities and rules that come with being a regulated business.
Many firms are still very traditional, and advisers may not feel particularly comfortable with social media use, or immediately think of using it as a tool to help others understand their finances. While they probably know how to use it personally, many wouldn’t know where to start when it comes to posting targeted content to improve financial literacy or attract clients.
Despite these challenges, firms should use social media and advisors should elevate their social media presence to become ‘finfluencers’ in their own right. Social media can be a force for good in helping to educate a difficult to reach audience about their financial affairs. The industry must adapt if it wants to reach the next generation. Social media is the way forward, it’s not going to go away.
Tips to get started:
- If you are new to using social media to boost your own profile and educate your audience, spend time observing other people and brands you admire to see how they approach things.
- Try commenting on, liking and sharing content you feel is relevant to your own audience
- Once you feel more confident, try posting your own content, but remember this can’t be financial advice, and needs to include the necessary disclaimer to remain compliant with FCA rules.
- Mix it up and keep things interesting by using a range of formats. These could include infographics, charts, polls, articles and videos. Test different approaches and see what works best.
- Some basic kit including a ring light and microphone can improve the quality of video content and make your posts appear more professional.
- Use relevant hashtags and tag other stakeholders and organisations in to extend the reach of your posts.
- Posting good quality content regularly will help you build up a following.
- Remember social media is a two-way conversation, so make sure you respond to comments and questions promptly.
