I don't know if you've seen the articles in the past few days about the rise of so-called 'finfluencers'?
Finfluencer, for those who don't speak fluent TikTok (including me) is a portmanteau for 'finance influencer'.
And, in the way of these things, they're all over social media, filling the feeds of the (mostly) young, (mostly) non-financially-savvy people who might just be interested in taking control of their financial lives.
During those last couple of days, I've been asked more than a few times for my view on said 'finfluencers'.
And I've gotta say, I'm torn on it.
Now, I work for, and represent, a financial services company. And you might expect that I'm worried that new breed of self-appointed experts pose a risk to people like me, and a company like The Motley Fool.
You might expect that, but it's the least of my worries, and the last of my concerns.
The Motley Fool has a decent profile, but the industry is massive, and we're a teeny-tiny part of it, compared to the billions of dollars managed by financial planners and fund managers.
No, I have no issue with more people in our industry.
For what it's worth, I'm a massive fan of The Barefoot Investor, Scott Pape. There are many, many other examples of wonderful people in my industry, making a real difference for Australian investors.
So that's not my concern.
And, as I said, I'm torn.
I love the idea of more people getting into investing.
We have too few young people making really good financial decisions — putting aside a few bucks that can compound for 30, 40 or 50 years into a small fortune — and if they're encouraged to do it by someone on Instagram, TikTok or YouTube, well, that should be a good thing!
Except that, well, that's not necessarily all they're being encouraged to do.
Because the waters get pretty muddy (and just a little murky) once we push off from the financial shore.
A company like The Motley Fool, for example, operates with a Financial Services Licence. Our business has to adhere to very strict and specific rules. ASIC, the corporate cop, keeps a close eye on us, and others in our industry.
And if it sees something it doesn't like, we can expect a phone call, and we'll have to make changes. Which, for the record, we're always happy to do. The very regulations that impose limits on us (and the actions of the regulator in interpreting and enforcing those rules) mean that our readers and members can have confidence in the system, and in the advice we provide.
But these finfluencers?
Not only are they not licenced, but they fly largely under the radar of the regulator.
No-one is making sure they're doing or saying the right things, or is requiring them to change their ways, if they overstep the mark.
So we just don't know what's going on.
A very large number of these people are decent, honest, altruistic people, often who've discovered the power of investing, and want to share it with others.
Many have taken steps to educate themselves — formally or informally — to be better able to help their followers.
Many are having a wonderful impact.
But not all.
Some are giving, frankly, crap advice.
They've read the proverbial one and a half finance books, and are now self-appointed experts.
They've maybe been investing, themselves, for only a year or two.
And I'm left wondering how well they'll steer their followers, next time the going gets tough.
Others are getting kickbacks, sponsorship and other remuneration from product providers. Sometimes it's disclosed. But not always.
So, some of the new breed of experts will be a boon for their followers. They'll help people navigate the tricky world of investing; mixing sound financial principles, behavioural insights, some historical knowledge and context, and a calm demeanour when times get tough.
Others… won't.
Now, despite my role in the industry, I'm the first to say financial advisers aren't as important as doctors, dentists or emergency workers.
But if you'll allow me the analogy, don't you think it's important that the bloke who turns up to take your tonsils out has been approved by, and is overseen by, a professional body?
Don't you reckon the fiery who comes to cut you out of your mangled car, post-accident, has been appropriately educated, trained and supervised?
You're right — those are potentially life-and-death situations. Finance is most certainly not life or death.
And yet, don't you reckon that someone setting themselves up to be an expert should at least have to convince a regulator of that expertise?
But, as I said, I'm torn.
How do we get rid of the shonks, charlatans and bad apples, but keep the genuinely good people?
And how do we make sure that the currently very long and very expensive process of getting an Australian Financial Services Licence doesn't just act as a barrier to entry for those who are going to do the right thing, the right way, helping thousands of people in the process?
I have no simple answer.
Perhaps we need a two-tier regulatory framework, which distinguishes between people carrying on a business of managing money and/or providing advice, from those who are sole-traders or small businesses, trying their best to help people — and makes it easier and cheaper for the latter group to be accredited (and kicked out if they prove unworthy)?
That's only one solution.
And remember, property spruikers still aren't covered by the AFSL system — at all! (And 'buy now pay later' still isn't regulated as credit!)
There will be some among my readers who simply throw their hands up and ask 'Shouldn't it just be 'buyer beware'?
To which my response is: Maybe… but I think we should want to live in a country where we actively try to help each other be taken advantage of by the unscrupulous and mislead by the unwitting.
In the meantime?
In the meantime, I think we need to assume the 'finfluencer' community should be approached sceptically.
If you're going to follow someone on social media, make sure you ask yourself whether their advice seems grounded in real expertise. And in experience.
Ask yourself whether they are disclosing conflicts of interest. And who's paying them.
Ask yourself whether or not this is their first rodeo.
And ask yourself how much they really know.
Perhaps, most of all — and this applies to both licenced and unlicenced financial advice — ask about their long term track record. And remember that 'long term' isn't measured in months or even a year or three.
Once you've got all that covered, maybe consider helping your friends and family do the same.
As one person commented to me, about one of the articles I mentioned at the top:
"It might be time for you to embrace the tok-tik…tik-tok-tik-tokkety-tik-tik-tok!… because this just scares me."
No, I'm not going on TikTok any time soon (though I never say never).
But if the alternative is that conflicted, inexperienced, undereducated and unprepared voices are the only ones people hear… well, disaster may not be far away for many of those followers.
And that's the very opposite of the promise they bring.
Fool on!
