The financial services watchdog has sent warnings to social media accounts providing deceitful advice on platforms used by two thirds of young Australians.

Dodgy financial advice provided by social media influences is facing a crackdown, with Gen Z exposed to the misleading offers.

The Australian Securities and Investments Commission  (ASIC) has issued warning notices to four finance influencers, also known as “finfluencers”.

They are suspected of providing unlicensed financial advice, such as promoting claims of guaranteed returns, which could also be misleading or deceptive.

Gen Z falling for finfluencer claims

A recent ASIC survey found about two-thirds of Australians aged 18 to 28 used social media platforms to seek financial advice – and more than half said they trusted their takes.

“If someone on social media is promising easy money or guaranteed returns, there is a real risk they’re breaking the law, and you could be the one who loses money,” ASIC Commissioner Alan Kirkland said.

“What people see online is shaped by algorithms designed to drive clicks and engagement, rather than promoting accurate information.”

While the influencers have not been named, the commission’s surveillance has focused on those targeting Australian investors and discussing products including leveraged derivatives, shares and exchange-traded funds.

ASIC’s study, commissioned by YouGov, found young Australians were seeking out reputable and trustworthy financial content.

Sixty per cent said they used formal or professional sources.

Algorithms feeding fakes

However, the lack of control over their algorithm meant personal research often led them down a virtual rabbit hole of unreliable accounts designed for engagement rather than accuracy.

ASIC urged young Australians to study social media influencers and compare their advice with trusted, evidence-based sources.

They should also check whether a person or business is licensed or authorised before acting on their financial information through the ASIC Professional Registers Search.

Finance influencers must hold an Australian Financial Services license, or operate as a representative of someone with that license, if they want to legally provide advice on financial products.

Unlicenced finanical advice on the chopping block

Those who aren’t licensed or authorised could be imprisoned for up to five years or face million-dollar fines.

In December 2022, the Federal Court found social media influencer Tyson Robert Scholz had provided financial product advice about share trading on the ASX without a licence.

He had delivered training courses and seminars about trading in ASX-listed securities and recommended share purchases, and charged up to $1500 for subscriptions to different levels of share trading training.

Scholz was banned from maintaining a financial services business in Australia and ordered to pay $450,000 to ASIC for the costs of the proceedings.

Source AAP. This post first appeared on AAP Newsroom.

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