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?"
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.