The rise of finfluencers: Dos and Don'ts for followers and brands

Investors should conduct background research on the influencers, have a clear objective and should avoid unrealistic promises in order to ensure that they are receiving reliable and unbiased financial advice, the financial influencers themselves stated

Sakshi Sharma
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The increasing dependence on social media for information has led to some highly profitable but also to some precarious situations, especially when it comes to investing where the real money is involved.

Individuals, especially Millennials and Gen-Z are increasingly turning to Instagram and YouTube for finance-related content, and the experts in these fields are using social media to expand their audiences and accelerate their careers.

Chartered Accountants, investment bankers and stock market brokers are using social media to share tips and tricks with consumers, and these finance influencers, also known as 'finfluencers', have become an integral and important part of the influencer community. 

But this has also led to situations where people have lost their money by following wrong advices given by them, the situation can turn worse with no to minimal checks on these finfluencers.

Recently, Union Finance Minister Nirmala Sitharaman cautioned consumers against finfluencers and warned them to tread with caution while seeking their advice. She also said that the Ministry is working with MeitY and RBI to clamp down on ponzi apps to prevent them from taking away the hard-earned money of gullible investors, NewsDrum reported.

Finfluencers believe that Sitharaman’s statement is a positive step towards ensuring transparency and authenticity. Moreover, they said that regulating financial influencers can enhance credibility and professionalism. In fact, they want the government to work with them to provide credible information to investors by collaborating on initiatives such as financial education programs, investor awareness campaigns, and regulatory compliance seminars.

Positive step towards ensuring transparency, reminder for investors to be more mindful

Parth Shah

According to Parth Shah, digital content creator, entrepreneur and Angel investor, every statement has a case study to which people can relate to. The finance minister is right when she warns people to be aware of several apps offering ponzi investment schemes and finfluencers advertising them. 

"We have sensed a fragmentation around crypto, forex trades, stock market tips, F&O and apps trying to build a cult around it. I believe people would be more wise, accurate and would be asking a lot of questions over comments imbibing quick knowledge from certain tainted influencers," he added. 

Anushka Rathod

Anushka Rathod, the financial content creator, said that the Finance Minister has not made a blanket statement that all finfluencers are not good, or they are carrying out scams. 

"The Finance Minister cautions against financial influencers, which in itself is not incorrect. She did mention it, but it's part of the statement, right? And people are just reading that part of a statement, and they think that our Finance Minister has made a blanket statement against all finance creators. So, I think these clickbait headlines and their portrayal in the media are what is impacting the perception of all finance influencers," she said. 

Jay Desai

As per CA Jay Desai, finance content creator, the recent statement by Sitharaman is a positive step towards ensuring transparency and accountability in the industry. The guidelines aim to protect the interests of investors and promote responsible financial advice.

"As a financial influencer myself, I believe that these guidelines will only enhance our credibility and reputation among investors. This will help ensure that the industry operates with integrity and accountability," he stated.

Shreyaa Kapoor

Shreyaa Kapoor, finance content creator, believes that this statement is another gentle reminder for investors to not consume content without due diligence. This should nudge investors to always do their own research and not blindly trust anything and everything they see online. 

“If anything - this statement is an indicator that investors often fall prey to dubious get rich quick schemes, which in fact is far from reality and hence, they should be more mindful of who they follow online and the content they consume,” Kapoor added. 

Ayush Shukla

Ayush Shukla, Founder of Finnet Media, stated that there is a need for caution when seeking advice from financial influencers. “It's not a question of financial influencers, it's a question of finance. If finance is there, you have to be cautious,” he added.

Statement by Finance Minister won’t impact finfluencers’ brand deals 

Shah said, "The finfluencers that I have come across have been really wise and accurate while choosing what to promote and what not to promote. I usually follow a checklist where I avoid promoting crypto, forex or any quick money schemes and stock market tips are also a big no, so there is a rare chance it would impact my brand deals and partnerships as a finance influencer."

Speaking on similar lines, Rathod said that her brand deals and partnerships will not be affected because brands that she works with understand the kind of videos she makes and they know that it is high quality and good content. "I don't have any other incentives when I am putting out videos and if there is a paid partnership, I disclose it.”

As per Desai, his brand deals and partnerships are based on his ability to provide valuable and trustworthy financial advice to his audience.

“By adhering to these guidelines, financial influencers like myself can demonstrate our commitment to responsible and ethical behaviour, which can help build trust and confidence among our audience. This, in turn, can lead to stronger brand deals and partnerships with companies that value transparency and accountability,” he added. 

On the other hand, Kapoor said, "Personally, I do not see anything changing. But brand deals in general have seen a slowdown because of other macroeconomic factors. I feel that this statement should only guide creators to be even more aware of the brands they choose to partner with.”

Paid partnerships

Almost all finfluencers spoke to agreed that transparency is of utmost importance in this segment and also added that it is important to declare interests in the form of paid partnerships, wherever the case may be.

Shah said, "I won't deny the fact that there is fragmentation around what influencers promote and the youngsters imbibe out of those videos. I decode the business finances of a variety of businesses and start-ups through my videos. I just want to build an entire value ecosystem around two questions: “Kitna kama lete ho?” (how much do you earn), “Kaise kama lete ho?” (how do you earn).”

“I want more people to start their own businesses. The content should have a value-driven vision and should focus on creating a culture around it. Decode information, don't give advice,” he added. 

Desai said that his primary goal is to provide reliable and unbiased financial advice to his audience. To ensure that his advice is not influenced by other factors, he follows a set of best practices that include transparency, research, diversification and thinking independently.

As per Kapoor, it is paramount to outrightly mention if a piece of information is a paid partnership or own opinion. Doing this will ensure that consumers also have all the information they need when watching content. 

Regulations are much-needed

Shah believes that financial influencers should be regulated, as should the apps that offer ponzi schemes, this will stop a lot of fragmentation around quick money schemes and unrealistic promotions. 

Striking a similar tone, Rathod said that finance influencers should be regulated because it's a grey area. "We are self-regulating at this point, and we are doing things in our best interest. However, not everyone is self-regulating, and the entire industry is not following the same norms. There are so many brands and products that I refuse to work with but other creators then move ahead with it,” Rathod stated. 

Furthermore, she went on to add, “As an industry, if there are things that are set aside that are the kind of topics you can't talk about and the kind of advice you can't give, then it's clear, and then we will actually be functioning with more clarity.”

Similarly, Desai stated that the financial industry should be regulated to ensure that investors are protected and that ethical standards are maintained. This includes financial influencers who provide financial advice to the public.

“As a financial influencer myself, I welcome such regulations as they can help enhance the credibility and professionalism of the industry. However, it is important that these regulations are implemented in a balanced manner, without imposing excessive or unnecessary restrictions on the industry. If such regulations are implemented, I believe that they could impact my work positively by enhancing my credibility and reputation as a responsible and ethical financial influencer,” he added. 

Kapoor said that there is no doubt that finance as a niche needs better regulations in place. She firmly believes it will only create a safer space for consumers as they will also be assured that the information available online is abiding with the regulations in place. 

Shukla believes that the Finance Minister was not directly targeting all and she made a generic statement.

“She might be talking about the finance influencers in the Telegram groups who scam people. She might be talking about finance people who are the bad apples in the ecosystem and who scam people, right? So, you can't just use one copy-paste statement for everyone. So, I think of course some regulations might be necessary and should be at least thought about. Regulations can of course always be there in all the places but it has to be a mutual dialogue and not a one-sided statement,” he added.

Investors need to focus on basic research, look for independent analysis

According to Shah, there are a lot of young investors who want quick money and have gone into losses. People are getting smart with time, investors have to focus on basic research and should have a long-term approach towards money-making.

Rathod said that with a bullish market and an influx of information, it's important for the investors to have a clear objective, keep a check on the current debt level and clear it first if it is huge. Also, not everyone wants to take a lot of risk and that is okay.

“Depending on what you are comfortable with, you can go ahead and invest. Lastly, only SEBI-registered advisors can recommend stocks. So, if anyone else tells you to buy a stock or invest in a particular IPO it is not allowed. Stay away from such advice. Also, stay away from stock tips and Telegram groups,” she added. 

According to Desai, investors can take certain steps to ensure that they are receiving reliable and unbiased financial advice from influencers.

“Investors can conduct background research on the influencer to assess their credentials, experience, and reputation. Also, investors should seek out influencers who provide independent analysis and research, rather than simply repeating mainstream opinions or recommendations. They should also be wary of influencers who promise unrealistic returns or make guarantees about future performance,” he added. 

Expectations from government

Rathod believes the government can work with finance influencers to understand what different kinds of videos are out there and how something which might seem innocent, can also be misleading. 

"This is so we can understand and know what different kinds of videos are there and we can tell them that these are general, safe educational videos but in these types of videos there should be a directive which states that these kinds of videos should not be made because directly or indirectly they are misleading or giving direct advice to people which may or may not help them,” Rathod stated.

“After that, they can actually understand how our processes work, how we work with brands, and how brands chart, so that they come to know what exactly is the motivation behind our working with a particular brand and what are the guidelines provided by the brands. There have been brands that have come to us and asked us to make false claims or say certain things that might not be in the best interest of the audience,” she added.

Shah stated, "There has to be a circulation and focused group discussions which involve experts from regulated government bodies and influencers, both have to join hands and fix this."

Desai said that firstly the government can work with financial influencers to provide credible information to investors by collaborating on initiatives such as financial education programs, investor awareness campaigns, and regulatory compliance seminars. 

Secondly, the government can provide financial influencers with access to reliable data and research, which can help them provide more informed and accurate financial advice to investors.

Kapoor stated that a lot of finance influencers want what is best for their audience. Hence, most would welcome the regulations the government puts in place. “I feel the government should actively get in talks with the aggrieved parties and finance creators to find the best way forward. There are already existing regulations for SEBI registered advisors, maybe similar regulations can be brought about in other tenets of personal finance as well,” she added.

Shukla stated, "Whenever we work with somebody, we obviously see what background they come from. Anushka Rathod has worked in investment banking for two to three years. A lot of our creators are CAs. Jay is a CA. Sharan Hegde has worked in the industry for two to three years and he is very updated with whatever changes are happening in the ecosystem. So, I think it's just about ensuring that the people you work with are coming from a place of knowledge that is updated and they don't have a bad incentive to not promote anything. So that's how we work with creators who are up to the mark.” 

Furthermore, he went on to say that in light of the Finance Minister's statement, he will not change the approach to managing financial influencers because he has been doing it the right way and so have all the creators that he works with. 

Shreyaa Kapoor Anushka Rathod financial influencers Nirmala Sitharaman CA Jay Desai Parth Shah financial advice Ponzi regulation Finance Minister influencers filfuencers Finnet Media Ayush Shukla finance content creator