The FMA is raising public awareness of the risks of engaging with financial influencers.
Photo: 123rf
Fourteen financial influencers, or finfluencers, have been contacted by the Financial Markets Authority (FMA) as part of a global effort to crack down on dodgy online behaviour.
The regulator has joined others around the world in a global week of action against unlawful finfluencing.
Regulators are running campaigns, undertaking enforcement action and regulatory measures as well as offering educational programmes for financial influencers.
In New Zealand, the FMA is focused on raising public awareness of the risks of engaging with financial influencers, as well as reminding the influencers themselves of the legal rules around promoting or offering financial products and services.
Samantha McGuire, manager regulatory services, said consumers were increasingly relying on social media for financial information, exposing them to potentially misleading promotions or fraudulent products and services.
“As financial promotions become more prevalent on social media, international collaboration is crucial in our ongoing efforts to strengthen consumer protection, safeguard individuals from misleading financial promotions and support a fair online environment. This joint action highlights our collective efforts to protect consumers,” she said.
“We’re all living our lives more online and people are pivoting to that trend and looking at new ways to reach the audience and reach people. There’s a good side of it and a darker side.”
She said most financial influencers were operating within the law and shared information that made investing and trading more accessible.
But the FMA had also seen an increase in cases where influencers were misleading people or operating outside regulatory boundaries.
The FMA contacted 14 who were active across a range of social media platforms, to outline relevant legal obligations and address concerns about their online content or offerings.
As a result, misleading or harmful content was removed, the FMA said, including advertisements targeting New Zealanders. Some finfluencers reduced the scope of their services or stopped offering services to New Zealanders altogether.
More copy trading apparent
She said the FMA had seen growth in copy trading, where influencers encouraged followers to replicate their trades, and promoted it as an easy and fast pathway to success.
But these could involve complex, high-risk products.
The promotion was often supported by luxury lifestyle marketing, showing off expensive cars, designer item and other luxury goods, which gave a false impression of success and downplayed the risk.
“We see ongoing schemes that constantly pop up… a pyramid scheme or a multi-level marketing.
“But we also see, you know, these claims of lifestyle, you can get rich fast, put in maybe a couple of hundred dollars and suddenly you’re getting these massive returns. Now, all this content that you see talks about the upside, but it doesn’t talk about the downsides, and it’s really concerning because often people who are attracted to this are people who are trying to get ahead.
“It’s tough out there and they’re trying to cover their bills, put food on the table for the whanau. So people are looking for extra ways to source income. And unfortunately, the less scrupulous ones of these are taking advantage of this.”
She said once people showed an interest in the content, it kept coming.
“Once it’s in your algorithm, hashtag financial freedom or ‘looking for a side hustle’, that’s all you get delivered. It’s hard to delineate good from bad.
“It’s hard when you’re a professional and work in this space. It’s doubly hard when you don’t know what you’re looking for… everything sounds amazing. If someone’s out there with fast cars, watches and the luxury holiday, we all want a slice of that.”
‘Seeing is not believing’
She said people who wanted to protect themselves should slow down and be careful about what was being presented.
“A lot of followers or the lifestyle or what they’re seeing might not be the reality.
“Always go in with … a little bit of a jaundiced eye, seeing is not believing.
“And if someone is giving advice or making claims, particularly in terms of if they’re saying they’re giving financial advice, a good place to start is to see if they’re licensed in the financial services provider register and they’re actually qualified to do that.
“Don’t take the advice based on one post or video…have a look at all their content and what they’re saying. Often, some of these are paid promoters, and so it’s kind of understanding there might be something in it for them. If you have your concerns, it’s always good to get a sounding board, you know, talk to someone you trust or, you know, a licensed adviser if need be or professional.”
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