Background

Social media is a tool which is widely used for sharing of information. Nowadays, social media is playing a crucial role in the financial services industry since it has become a powerful tool for entities to reach out to both their existing clients and prospect clients. Some companies are appointing individuals who have a large online presence and followership on social media to create and generate content on different topics including, financial topics. Such individuals use their digital media influence to affect their audiences’ purchasing decisions or opinions about a product or a service. In many instances such influencers, or “finfluencers” as they are sometimes referred to, do not have the necessary expertise and requisite qualifications required, to offer such content. In view of this, the Authority wishes to alert the public to exercise caution when coming across content created by finfluencers.

What is a finfluencer?

Financial influencers who have an active presence on social media platforms and who engage with their audience by providing financial tips and experience with managing their personal finances are known as finfluencers. Influencers in general create content on social media (such as Facebook, Instagram, YouTube, LinkedIn and TikTok), in the form of videos, short reels, stories and upload of photos of products or services offered by regulated or unregulated entities, with the aim of exercising their influence on the purchasing decisions of their audience through their content.

Risks arising from content created by finfluencers

Overall, the information being provided by fin-influencers seems to be rather easy to understand, accessible and generally free when compared to the financial advice being provided by an investment firm.  One can easily note that generally the content does not appropriately include the risks of the products or services being promoted and more emphasis is placed on exaggerating potential gains. Information relating to the characteristics of  financial products, such as the complexity and the risks involved especially the risk of losing the money invested are not always mentioned by the finfluencer. Complex financial products such as: Contract for Difference (CFDs), Foreign Exchange trading (FOREX), Cryptos and Structured Products, amongst others, pose several risks to retail clients and the omission of clear disclosure may result in the provision of unclear and misleading information. Most often, such finfluencers are not authorised and licensed to carry out such activities and thus such an action would result in unauthorised activity being undertaken by the finfluencer.

Things to look out for

Since the financial content created by fininfluencers is on the rise, the Authority wishes to inform the public to exercise caution and be well informed about what to look out for and to ensure credibility in what is being watched and read. The following measures should always be kept in mind:

• Authorisation: It is recommended that the public makes use of the Malta Financial Services Authority's (herein referred to as the ‘MFSA’) Financial Services Register which can be accessed through the MFSA website to determine whether the firm being promoted is indeed authorised and licensed by the MFSA.
• Investment Advice: Generally, finfluencers would not be licensed as financial advisors. This means that a finfluencer may be illegally providing financial advice without having a license. Therefore, it is imperative that the necessary checks are made to determine whether such individuals are indeed authorised by the MFSA.
• Marketing: Finfluencers may use deceptive marketing to advertise solely the benefits of the financial instruments and do not delve into the risks and complexity. Generally, finfluencers would employ hard selling techniques such as organising seminars to attract other individuals to buy such financial products.
• Scams: When viewing content online, be vigilant for potential scams which can look genuine but most of them are attempts to get your personal or financial details. You should always obtain the necessary information prior to undertaking an investment decision.

 Conclusion

In view of this, the Authority wishes to alert the public that social media is full of finance ‘experts’ promising money, particularly to young people who tend to prefer to invest through social media instead of going through the traditional way.  Social media influencers make it seem very easy to make money at the touch of a button, without mentioning the underlying risks, including that of losing all your money.

Before following the content communicated by finfluencers, it is imperative that you ensure that the entity is licensed by the MFSA and that you have the necessary knowledge and capacity to understand the risks involved in the action to be taken by following content of finfluencers. Reliable information is fundamental before making any investment decision and it is recommended to always consult with a licensed financial advisor especially since certain products and services may not be suitable for you.

Contacts

Should you have any queries regarding the above, please do not hesitate to contact: [email protected].