Finfluencers, who they are and why you need to be careful

In a world where social media and influencers are becoming increasingly relevant in influencing purchases, it is important to pay particular attention when it comes to financial products and services promoted by so-called finfluencer: they are a bit of a broker and a bit of a TikToker and promote financial, banking, payment and/or cryptocurrency products or services through their channels. Did you catch any? They often present themselves as ordinary people who have managed to obtain monstrous returns from their investments. Very often, they have a large following and their recommendations can produce a significant impact on the decisions made by thousands of investors.

The analysis: trusting is good, not trusting is better

Many doubt the quality of financial advice that finfluencers are able to offer to their followers. In 2023 a study published in the journal of the Swiss Finance Institute, through the measurement of the quality of the contribution carried out through thealpha analysisi.e. the return generated net of traditional return factors (Fama-French) has divided finfluencers into three groups: skilled, unskilled And antiskilled. The former, who represent 28% of the population, achieve positive, even significant, results. The latter (16%) add no value. The third group, numerically larger (56%), actually ends up destroying wealth. Results which, overall, are not too surprising and appear in line with the literature and numerous studies published on the topic. The analysis, in essence, shows that more communication strategies have a greater influence. In fact, the worst finfluencers carry out more frequent communications and the greater assiduity in disseminating advice allows them to attract more users.

Red alert in Europe and the USA

The alarm is general. In the USA, where the phenomenon has gained more popularity, the Securities and exchange commission (Sec) is concerned about the phenomenon of finfluencers, especially because most of them provide investment advice or recommendations to the public without authorization. According to US federal laws, anyone who gives financial advice for a fee must register with the SEC itself. In 2021 theEuropean Securities Authority (Esma) urged savers to be careful when making decisions based solely on information from social media and other unregulated online platforms

Spain, France and the United Kingdom have decided to adopt very stringent rules. In particular, in France the promotion of some financial products has been banned by the new law on influencer marketing and the same thing happened more or less in the UK. Plus, some platforms like TikTokto overcome the problem, they have inserted a clause that requires finfluencers not to cloak themselves in the title of financial advisors or to explicitly announce if one of their contents has advertising purposes.

The situation in Italy: «marketing practice used by banking institutions»

In Italy, there is no ad hoc legislation for i finfluencer and not even the supervisory authority has expressed an express opinion on this phenomenon to date. However, existing banking and financial regulations already provide specific rules governing the promotion of banking and financial products and/or services and these rules can also be considered applicable to promotion carried out via finfluencers.

This is due to the fact that the promotion of banking and financial products and/or services through finfluencer it is a practice increasingly used by financial and credit institutions to reach potential customers on a large scale. However, banking and financial institutions have obligations: they must verify, on the one hand, that advertising is carried out in compliance with the specific rules established for this type of commercial communication, on the other hand ensuring that the finfluencer, in terms of how he creates the promotional content , does not end up violating the rules.

They explain it better Maria Luigia Franceschelli and Elisabetta Zepperi, counsel at Hogan Lovells: «Finfluencers, like all other influencers, must respect the Consumer Code, the Advertising Self-Regulation Code and the Digital Chart of the Institute of Advertising Self-Regulation (IAP), as well as the Consolidated Law on Audiovisual Media Services (TUSMA), where applicable according to the AGCOM Guidelines adopted in January. They are also subject to advertising regulations. However, the general rules of transparency and accuracy provided for by these regulations must be observed more rigorously than those applicable to normal influencers and for this reason finfluencers’ commercial communications must provide clear and exhaustive information to avoid misleading the public regarding the advertiser, the nature of the proposal, the characteristics of the products or services offered, the applicable conditions and the risks associated with the operation”, conclude the experts.

Caution and thoughtfulness

In essence, when it comes to savings, it remains essential to move with caution and thoughtfulness. It is always a good idea to rely on the advice of experts and not be dazzled by overly tempting promises. Remember, haste is a bad advisor: take the time to carefully evaluate every financial decision.