Speaking at the Stockbrokers and Financial Advisers Association Conference this week, minister for financial services Jane Hume noted the rise of TikTok influencers spruiking stock tips and crypto assets.
The global reach of individuals on social media and the ability for consumers to invest instantly through online platforms could prove concerning for those in the investment industry, but ultimately the minister believes it all is key to “removing the friction makes the economy far more productive”.
“With lower costs and easier access, retail investors with limited technical knowledge and experience will continue to enter financial markets,” Ms Hume said.
“Now, sometimes, they may make bad investment decisions. And they may sell at the first sign of losses, speculative bubbles – and doesn’t matter whether it’s in tulips or in equities – [they] do correct themselves in time. While it’s frustrating for investment professionals to watch, at some point, we have to let people make their own decisions.
“We have to back Australians to be sensible enough to judge for themselves, where and whether to put their hard earned money into high risk assets.”
But RMIT senior lecturer in finance Angel Zhong has countered Ms Hume’s allowance for investing influencers with concerns.
In Australia, giving financial advice without a licence is illegal, with penalties ranging from up to five years’ imprisonment to fines up to around $133,200.
“Hume said an influencer giving financial advice is similar to the bloke down at the pub who wants to tell you all about the really great company he just invested in, but just louder. But they’re actually not similar – social media influencers are able to reach a significantly larger audience,” Dr Zhong said.
“The bloke at the pub does not make profits from telling you about the great company he just invested in. On the contrary, social media influencers generate income based on the views of their contents. There is also a possibility that the influencer has a vested interest in the company, ETF or other investment products that they recommend.”
Further, Dr Zhong warned social media influencers have encouraged risky behaviour, such as day trading and get-rich-quick schemes.
“Many videos and posts have also been encouraging investors to borrow money to invest in cryptocurrency, which suffered a huge loss in the recent crypto crash,” she said.
Michael Duffy, director of Corporate Law, Organisation and Litigation Research Group at Monash University added the recent falls in bitcoin convey looming challenges for governments and regulators.
“Legal regulation of digital currency as an investment product is beset by uncertainties, yet digital currencies come with considerable investment risk – given that they are not linked to underlying assets,” Dr Duffy said.
“Their value is based on confidence in the currency itself, ultimately as a means of exchange. That confidence can be highly variable.”
Ms Hume also commented that while cryptocurrency is a volatile asset, she expects it will grow in significance for Australia’s economy.
There are now more than 4,000 cryptocurrencies in existence.
“Cryptocurrency is not a fad. It’s an asset class that’s going to grow in importance. Participants in financial markets, including advisers and stockbrokers, are now beginning to venture into cryptocurrency in response to client interest,” Ms Hume said.
“But I want to say to Australian consumers that if you want to invest in Dogecoin, I’m not going to stand in your way. Personal opportunity and personal responsibility are two sides of the same coin.
“We have safety nets to catch people when they fall, but we will not stop them from having a crack at climbing the mountain. To create a society that is innovative, forward looking, and constantly improving we must allow people to take risks.”
“consumers have the right to make their own decisions”…. maybe tell ASIC or AFCA…I’m off to dance and make a tik tok video
let me think…15000 adviser or 25,000,000 investor votes i can get…which one will i aim at???
Amazing the intellectual power concentrated at ASIC and Government – could run a large country into the ground given time.
So I now don’t have to do an SOA because people have the right to make their own decisions?
Actually, Jane’s comments are completely sensible. It is financial advisers who are in a land of non-sense.
Yes!!!!!!!! 100% correct
A lot of comments make a great point – everyone who is not a financial adviser can give advice, if they are overseas, they can give personal advice. Only financial advisers have to go through a ridiculous amount of red tape – because we abused our trust position. Let us fix that and stop product providers calling their salespeople financial advisers.
That is not acceptable as it abuses trust.
You may have abused your trust position, but I certainly did not, and I suspect most other advisers didn’t either. I am heartily sick of people who say financial advisers brought regulatory overkill “on themselves”. By all means speak for yourself if you have a guilty conscience, but don’t pretend to speak for the rest of us.
Well said.
Off you go – call Industry Super and have them stop this practice right now. Thanks.
Can anyone give me detailed instructions on how to register and start a tik-tok channel, will be providing all my clients (since I’m their influencer) advice via this medium…
Any “influencer” or “blogger” or “content writer” or “author” who makes money from publishing financial advice is subject to the Corps Act and must abide by it.
For the supposed minister for Financial Services not to know this is unbelievable. For her to actually condone these people giving illegal, inappropriate, financial advice is inexcusable.
So dumb, they don’t even realise they are dumb
There is an excuse for her and ASIC – either incompetent or corrupt?
Thats all great if it applied to everyone who invests but it doesn’t.
If an idividual wants ot invest in an asset and losses they accept the balme.
If that same individual then goes to an advsior and says they want to invest in an asset, and the advisor does everything correctly, and the client then makes a loss, the client goes of the AFCA and complains that they didn’t really understand the advice they received and the advisor losses and it costs them subsatantially.
Wheres the balacne in that?
Brb just going to give financial advice on TikTok
Wow. How completely and utterly irresponsible. May as well do away with those useless SOAs we licensed advisers have to prepare for clients so they understand the risks of the investment we are recommending. Oh wait, while we are there just forget about the FASEA national exam and the Code of Ethics. Standard 2, Standards 5 & 6 – pfftt… no probs. Just ignore and go online.
Can we now give clients advice via a private tik-tok channel…seems it’s got the ministers approval?
Humes marbles have fallen out of her head…??
All I can say is WOW?
[b]‘We have to let people make their own decisions’[/b]
Hypocrite Hume at it again.
[b]‘We have to let people make their own decisions’[/b] except for Real Financial Advice.
So people can make their own decisions about Ponzi Crypto’s and Pump & Dump online fraud and Hume will do NOTHING about it.
Yet Real Adviser are forced to treat clients like 3 years olds, they can’t possibly make any decisions for themselves, have to be explained everything under the sun and more, have to have everything under the sun documented and if anything goes wrong, regardless of whose fault, then the Adviser cops it in the neck with AFCA and PI Claims.
And the soon to be Adviser funded compo of last resort.
Hume you and the LNP are a total disaster, 8 years of disgusting LNP Adviser persecution.
So hang on, people have to take personal responsibility for their investment decisions, and anyone is allowed to give advice with impunity (even if they have vested interests). The only person not allowed to give financial advice without being significantly hamstrung is a financial adviser.
Make sense to me…
So why then prosecute poor advisers having a go, like say Melissa Caddick? If people want to have a crack investing with ‘advisers’ like her they should be allowed to by your logic. Why even have a licencing, education and registration regime for advisers?? FASEA? Let anyone have a crack you say? Good luck with that!
Yes I understand that the Liberal Party in Australia is very worried about Free-Dumbs and personal responsibility and less regulation (for their corporate mates, not for regulated Advisers obviously); I will remember that when next at the ballot box.