FPSB, the standards-setting body for the global financial planning profession and owner of the international certified financial planning programme, wrote about the rise of complex financial products, technology innovation and social media with finfluencers.
Its submission was to the International Organisation of Securities Commissions Retail Market Conduct Task Force, in response to a consultation which looks to develop a regulatory toolkit for jurisdictions around the world to increase efforts to prevent retail investor harm.
“Financial fraud and scams are certainly not new, but the rapid emergence and evolution of crypto assets and other complex digital assets means the level of risk and exposure for retail investors is becoming heightened,” said FPSB head of stakeholder engagement Dante De Gori.
“Licensing and product regulation are struggling to keep up with this fast-changing landscape, leaving financial planners unsure of their regulatory obligations and leaving retail investors to go it alone, guided by marketing campaigns, often with harmful consequences.”
FPSB and its global network of non-profit certification and professional bodies certify more than 203,000 certified financial planner professionals around the world.
The consultation comes as retail market conduct issues are escalating on a global scale in the context of the pandemic, rapid technological developments, and an increasingly complex and changing retail trading landscape.
We need to be creating content that helps us build our own following, and nurture them into becoming clients as best we can. Amyr Rocha Lima, CISIFPSB’s submission to IOSCO provided recommendations on issues including the impact of social media and ‘finfluencers’, and the need to regulate crypto assets and ensure that all who provide, or who are deemed to provide, financial advice are appropriately qualified to do so and held accountable for that advice, including finfluencers.
Chair of the CISI Financial Planning Forum Committee, Amyr Rocha Lima, said: “The Financial Conduct Authority (FCA) has recently used its supervisory powers to crack down on an investment app’s use of 'finfluencers' to promote the firm’s services.
“Finfluencers are social media celebrities devoted to sharing financial information on TikTok, Twitter, etc… and they’ve gained widespread media interest by posting about their stories of repaying personal debt and offering tips to help others with money worries.”
Rocha Lima said a lot of the banter among financial planners on social media around the FCA’s actions has a theme of “thank goodness, run them out of town”.
“However, aren’t finfluencers just the 'supply' for information who are actually filling a demand?,” he said.
“Indeed, if this isn’t the case, there would be no reason why the public would want to watch or listen.”
Recommendations
FPSB said members should establish a regulatory ‘sandbox’ for social media influencers and publish those operating in the sandbox on a public register of qualified fin-fluencers.
It said members should engage technology platforms to develop cooperation agreements to suspend or ban individuals, product providers and other organisations using the platforms to defraud or scam investors, or otherwise breach securities laws.
De Gori said: “FPSB, the FPSB Network and the global CFP professional community have a role to play in supporting IOSCO members seeking to better protect investors in their territories.”
Some of the recommendations by FSPB included:
- IOSCO should conduct research to better understand the correlation between the investor’s status – either ‘self-directed’ or ‘advised’ and the investor’s likelihood to experience unmanageable/catastrophic financial loss when investing in complex products;
- If IOSCO members continue to allow self-directed investing in complex products, self-directed retail investors’ ability to access digital trading platforms should require successful completion of a ‘financial knowledge test’ to demonstrate a minimum level of financial literacy and capability;
- IOSCO members should develop appropriate safeguards, such as the investor’s need to obtain financial advice, before permitting use of ‘leverage’ on complex products;
- IOSCO members should prohibit the use of credit cards to purchase complex financial products.
Rocha Lima added: “Whilst I have a lot of sympathy for all the FCA’s risk warnings, and reading comments from regulated advisers saying we should be the people to 'influence', I assume the public - who have real life needs - just want information, guidance and advice from someone who turns up and gives it to them.
“It seems to me that the finfluencers are doing that. Most financial planners are not.”
He said financial planners can take advantage of this situation by getting better and more comfortable with marketing.
“We need to be creating content that helps us build our own following, and nurture them into becoming clients as best we can," he said.
“If not, we should at least understand how you can best provide practical financial information to our local community, through leveraging the educational resources available through our professional bodies.”
The CISI chair explained that there’s “a very good reason” why financial planning advice is as regulated as it is and it is down to the fact that it can go wrong pretty badly.
“Let alone the generic 'pub talk' that is being pushed out to anyone who will listen,” he said.
“All in all, I believe this offers a great opportunity for the proactive firms creating good quality content to fulfil the public’s demand and organically grow their business.”
sonia.rach@ft.com
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