Regtech companies could adapt their existing financial advice solutions to help social media users discuss financial matters, ASIC Commissioner Cathie Armour said on Wednesday.
Speaking at the annual Accelerate RegTech 2022 event, Ms Armour suggested regtech could solve the problem faced by retail investors seeking financial advice online.
In 2021, ASIC’s Young People and Money survey found that 33 per cent of 18 to 21-year-olds follow at least one financial influencer (or finfluencer) on social media, while a further 64 per cent reported changing at least one of their financial behaviours on the advice of a finfluencer.
“Online discussion about financial products and services can provide helpful insights for investors and it is very positive that investors are taking a proactive interest in their financial futures,” Ms Armour said.
But consumer safety is paramount, she underlined.
“Recognition of the importance of consumer protection in financial services has meant that financial advice is specifically regulated.
“So, accepting that the use of technology has the potential to improve financial inclusion and develop people’s financial capabilities, how can we best ensure that these services are effectively provided in compliance with our laws?”
That’s where regtech comes in.
“It strikes me that this is an area where regtech has a real place,” Ms Armour said.
She questioned, however, whether regtech is adapting fast enough to provide solutions to these global regulatory trends before they become local problems.
“Financial technology has typically been developed to solve frictions in the system.
“Is regtech exploiting these opportunities to solve frictions early enough in the regulatory lifecycle?”
Last month, ASIC released Information sheet 269 to provide clarity on how the law applies to social media influencers and the licensees who use them.
The new guidance outlined activities where influencers may contravene the law if they are unaware of their legal requirements, considerations they should take, and also guidance for licensees who are engaging with influencers, with ASIC warning: “If we see harm occurring, we will take action to enforce the law.”
Dr Angel Zhong – who is a senior lecturer in finance in the school of economics, finance and marketing at RMIT University – applauded the move by ASIC, after a research by the university found that financial information consumed online influenced investment decisions.
“Unverified investment advice is no different to fake news, which is frequently flagged by social media platforms that urge viewers to read with caution,” Dr Zhong said.
“Newbie investors are particularly susceptible to receiving dodgy financial advice, as the internet replaces traditional outlets like accredited financial advisers.
“With the goal of protecting the financial wellbeing of investors, especially the young and inexperienced ones, ASIC can consider conveying the messages to young investors who rely heavily on finfluencers.
“ASIC will need to do this in a fun and engaging way by using social media, just as the finfluencers attract their large audiences,” she added.
READ MORE: ASIC warns off finfluencer promotion of crypto-assets
We can all sit here and laugh at the problem but none of us can provide the solution because of regulation. That’s the best sign yet that the regulation is outdated.
what could go wrong just look at all the money lost from people impersonating real companies…… lets open it up to more tech…..
Really ASIC could also be replaced by a programme, just a plain old computer programme run out of excel or similar. There is no need for any humans to work at asic, at all, humans are expensive, they have feelings that can get in the way of operational matters, pesky humans, can we look into a regtech solution for this too?
ASIC are lazy and incompetent. They seem to have all the time and effort to make it impossible for advisers to provide quick and cheap advice to clients, but if they are asked to do their job and protect the general public from unlicensed advice its too hard. The solution is simple let the qualified advisers give this advice by removing the huge level of regulation, instead of throwing it to robo advice which the majority of people won’t use.
“ASIC will need to do this in a fun and engaging way…” – because many Advisers have seen how fun & engaging ASIC can be….
I needed the laugh. Thank You!
Comment of the year
Here we go again. Bad regulators trying to avoid responsibility for their mess by promoting technology gimmicks.
“Regtech” is not the solution. “Roboadvice” is not the solution. The only solution to the consumer protection disaster caused by bad regulation, is fixing the bad regulation.
Bad regulation is a mixture of bad legislation and the behaviour of bad regulators. ASIC’s biased and incompetent behaviour is very much responsible for a large part of our bad regulation.
If only there were 17,000 qualified financial advisers whom could provide low cost general advice to the public…..
Now there’s a thought !
Longer term, It would be far better for all, to have more pensioners yelling at Prime Ministers at the pub appearance. So they’ll continue on with the strategy of Australians getting advice from Tik Tok.