An individual who predominantly uses social media platforms to provide information and guidance to investors on financial topics—mostly stock market trading and individual investments like mutual funds and insurance—is known as a financial influencer, or simply a “finfluencer.” But lately, worries about them have grown, prompting SEBI to intervene and the FM to issue a warning.
Like influencers in any other profession, financial influencers can have wildly differing levels of credibility. Not all financial influencers are made equal, and some may place a higher value on honesty and openness than others, or they may be more interested in promoting themselves or the things they endorse to make money.
Finfluencers are now an essential component of the ecosystem surrounding personal finance, helping to spread financial advice and increase public awareness. Although their extensive network and devoted fan base make distribution easier, questions about the calibre and dependability of the suggestions made on a large scale are raised, particularly in light P.R. Sundar controversy. Notably, P.R. Sundar was penalised and prohibited from trading for a year by the Securities and Exchange Board of India (SEBI) on May 25th, allegedly for violating investment adviser standards. In a case that started in 2022, Sundar, his business Mansun Consulting, and his co-promoter Mangayarkarasi Sundar reached a settlement with the SEBI on allegations that they were offering investment advisory services without having the necessary registration from the authority.
A Financial Sway Under Investigation
A greater focus has been placed on financial influencers due to the numerous instances of unethical trading that have been observed in the market. Therefore, government representatives and oversight organisations are searching for means to control these people’s behaviour.
The Actions Taken
Since January 2022, SEBI has stated that it intends to implement regulations; however, as of right now, no formal instructions have been released. However, mutual funds, registered investment advisors (RIAs), and research analysts (RAs) are no longer allowed by the market regulator to use influencers with more than 10 lakh subscribers to distribute adverts. Nirmala Sitharaman, the finance minister, also spoke about financial influencers last month and cautioned against Ponzi apps that purport to provide financial answers. She pointed out that even if there is not a proposal to control “fin-fluencers” just yet, prudence is necessary.
“If three or four people are giving us very objective, good advice, there are seven others out of 10 who are probably driven by some other considerations,” she stated. The Reserve Bank of India (RBI) recently stated that there are no urgent intentions to impose restrictions limiting influencers’ actions.
Issue of Credibility
Financial influencers have undoubtedly brought personal finance and its associated topics—such as equities, fixed income securities, F&O, taxes, etc.—from the elite to the general public, but there is also ample evidence, according to Vijay Chandok, MD & CEO at ICICI Securities, that many of them are spreading false information, encouraging trades that only benefit themselves or seducing naive novice investors into taking on riskier market bets. Numerous so-called “influencers” act covertly and are not registered with SEBI. As a result, we constantly counsel our clients to conduct independent research before giving up their hard-earned money and to only deal with SEBI-registered advisors. Investors should conduct a due investigation before following or acting upon the advice of reputable people in the ecosystem.
A bit of "Counsel"
Co-founder and CBO of Fisdom Anand Dalmia stated that suggestions and advice services are the main offerings of influencers. Finfluencers must engage in substantial formal and actual learning to guarantee the integrity of these offers. Influencers can make sure that their suggestions are supported by in-depth investigation and rigorous analysis by developing a solid foundation in finance and refining their analytical abilities. He went on to say that working with licenced and certified experts can improve the advice’s depth and legitimacy even more. This cooperative strategy blends knowledge and reach, which eventually helps customers look for trustworthy financial advice.
However, in today’s caveat emptor atmosphere, the consumer ultimately should discern between opinions and facts and assess the reliability of advice. People must be vigilant and use critical thinking when reading financial content, even while regulatory authorities work to close gaps in the ecosystem. People must be vigilant and use critical thinking when reading financial content, even while regulatory authorities work to close gaps in the ecosystem.
Conclusion
The legitimacy of financial influencers is a crucial issue in a world where financial advice is abundantly available online. People can choose wisely who to trust with their financial well-being by being aware of the elements that go into authenticity. The secret is to approach financial influencers with a critical eye and a dedication to financial well-being, regardless of their transparency, track record, or community involvement.
Written by – Sneha Jain
Edited by – Rajan Patel