Indepth: Part 2 - How Finfluencers are shaping the future of investment in India

The last few years have seen several finfluencers build a loyal fan base and catching the eye of the people and marketers alike. In this two-part series, Adgully seeks to explore the world of finfluencers, understand the factors contributing to the growth, how finfluencers are shaping the future of investment, and much more.

In 2021, there was a noticeable increase in the presence of finance-focused ‘finfluencers’. These individuals utilise their platforms to demystify investing, providing consumer-oriented financial advice, insightful commentary, and resources for constructing investment portfolios.

Influencers have gained significant prominence as a source of knowledge and guidance for investors navigating the evolving investment landscape, which now includes new products like cryptocurrencies and exchange-traded funds (ETFs).

A recent survey conducted by financial services company Personal Capital revealed that 54% of investors acknowledged being influenced in their investment decisions by social media posts or internet videos. Furthermore, 25% of investors claimed to have made investment choices solely based on referrals from influencers.

Also read:

Indepth: Finfluencers Part 1 – The high growth phenomenon amid caution

Avoiding the pitfalls

Ujjwal Gadhvi, a finance influencer, explained, “There are two ways in which a few influencers get influenced by the misinformation and spread it with their set of the community. These are:

Judging a video by its views is the new version of judging a book by its cover. Being favoured by the algorithm does not mean being right. If a video has gotten many views, people start trusting it, even if it is wrong.
By not checking the source behind the video. If someone is speaking about something in a video, the viewer also needs to do his research about it. Especially if it is investment or tax advice.

Several authentic creators are creating good content and spreading awareness. However, on the flip side, there is too much information available out there, which is confusing and/or misleading people.”

Chandralekha MR, finance content creator, added here, “Actually misinformation is a product of ignorance and irresponsible intent of the influencer due to which misinformation spreads across. It’s mostly a conscious call taken by the influencer rather than getting influenced. It takes a lot to be a genuine influencer because of the quantum of efforts involved.”

When it comes to influencers, it comes with a great responsibility, whatever you say, it reaches millions of people. So yes, the answer here is that whenever you have any information or misinformation, you should take care of that and check the information before passing it down to the millions of people who trust you, advised Vijay Nihalchandani, digital content creator.

“And if you spread misinformation, your audience will lose faith in you and won’t trust what you say then onwards and you will end up losing your credibility and following,” he further said.

Precaution’s the name of the game

In response to the proliferation of misinformation spread by finance influencers and Ponzi apps, Finance Minister Nirmala Sitharaman felt compelled to address the situation due to the lack of regulation or oversight.

To tackle this issue, the Securities and Exchange Board of India (SEBI) has introduced stricter guidelines concerning communications related to finance. SEBI has implemented a code of conduct for Investment Advisors (IAs) and Research Analysts (RAs), which covers all forms of communication intended to influence investment decisions. This includes pamphlets, circulars, brochures, research reports, notices, or any other document, information, or material published or used in electronic, wired, or wireless communication.

Under the new guidelines, any form of communication issued by IAs or RAs that has the potential to impact the investment decisions of investors or prospective investors is considered an advertisement. The advertisement code is applicable across various mediums, including print media, electronic media, and social media platforms. IAs and RAs are required to provide accurate information using clear and concise language and include their registered name, address, SEBI registration number, logo/trade name, and CIN in all advertisements. Furthermore, all advertisements must incorporate a standardized warning about the market risks associated with investing in securities. If the advertisement is not in English, an accurate translation of the warning must be provided.

Manisha Kapoor, CEO & Secretary General of ASCI, elaborated, “Influencer marketing is a growing and evolving marketing offering. Globally, influencers have taken digital advertising to new heights. In recent years, ASCI has been actively monitoring the content created by finfluencers to ensure that it complies with advertising guidelines and regulations. ASCI’s guidelines for advertising by influencers require them to be authentic and transparent by clearly disclosing any sponsored content and ensuring that their claims about products and services are truthful, honest, and not misleading. Additionally, influencers advertising products and services need to ensure that they do their due diligence before making claims on behalf of a brand.”

She further said, “ASCI has also set up an extensive digital monitoring system with in-built AI tools to keep track of influencer and brand activities on digital media platforms and identify content that violates ASCI’s codes and guidelines. To date, we have processed over 3,500 influencer violations. Most of the influencers comply with the recommendations of ASCI. The ones that don’t are served notices and listed as non-compliant on the ASCI website. The Central Consumer Protection Authority (CCPA) guidelines also require influencers to be transparent and honest about their brand connections. Now, with the Securities and Exchange Board of India (SEBI), too, issuing a set of guidelines this year and setting up a code of conduct that makes it compulsory for advertisements by investment advisors, including finfluencers to be truthful, accurate, and not misleading for potential investors, we can say that the government has put in place the strict measures needed to protect consumer interest in the category. As this is a dynamic space, regulation will also need to be nimble and keep pace with the changing formats of digital advertising.”

Reacting to the Finance Minister’s cautionary note on finfluencers, finance influencer Shreya Kapoor said, “Our Finance Minister gave out a statement saying that finance influencers are not to be trusted blindly. Some influencers are giving genuine advice, but most of them are saying things because they have other ulterior motives. I have come across many Reels which say “Buy this stock and sell it at this stipulated time.” So, regulation had to be brought into the picture and certain practices should be practiced as well, so that the audience knows it’s just information and they are not being asked to act upon it. We make sure that if it’s a brand partnership, then a partnership tag is there. Many do it and many don’t. I know many influencers who do it religiously, but some try to hide it. Do a partnership with only those brands which you would use for yourself.”

Parth Shah, finance content creator opined, “I won’t deny the fact that there is no fragmentation around this. Of course, there have been times when influencers have apologised after promoting something. There was a lot of fragmentation around, so there were people who were promoting Bitcoin, forex trades, futures, and options. I recently read an article that says that 9 out of 10 people lose money when they trade options in the stock market. There was a barrier amongst all these things, thus we created a platform where we won’t charge anything from businesses. We would just need the right financials and a track record of your business.”

Ujjwal Gadhvi pointed out, “Becoming an influencer now has become easier than ever. Barriers to entry are low and content is available in abundance. However, the more information is available, the more difficult it is to find reliable information. Unless the creator sharing the information holds a professional qualification and is experienced in the field he or she is making content on, it is hard to gauge the credibility of that content. Even otherwise, viewers need to be cautious about what content they consume and what they do after consuming it.”

He further said, “Influencers should take a few precautions while endorsing a brand or putting any piece of content out there in public. It’s good, if the content is backed by proper research and if the creator also has some professional qualifications to speak on the subject. But it is bad if the content isn’t backed by proper research and the creator is unqualified to speak on the subject in the first place. Worse, if viewers don’t use their judgment and rely on the content blindly.”

Chandralekha MR, too, emphasised, “These guidelines are very important because there is some section of financial influencers who are running ‘pump and dump’ schemes and promoting fraudulent things. This has to stop and guidelines are a start.”

“Don’t promote things that are between legal and illegal or on the verge of getting banned. Value your followers and the action they take after watching your video,” she advised.

According to Vijay Nihalchandani, digital content creator, “It's a chain, and when it starts forming, it goes a long way and reaches so many people because everyone uses social media. So, whenever you get any information, you should make sure it is right before publicly spreading the information.”

The audience and the content consumption

Content consumers should approach the information shared by creators with a critical mindset. They should consider the following guidelines:

Evaluate the credibility: Assess the credibility of the creator by considering their expertise, reputation, and qualifications in the relevant field. Look for reliable sources and cross-reference information whenever possible.
Verify the sources: Examine the sources cited by the creator to ensure they are reputable and reliable. Look for primary sources or trusted secondary sources that support the information presented.
Fact-check: Independently verify the facts and claims presented by the creator. Use trusted fact-checking websites or consult multiple sources to corroborate information before accepting it as true.
Consider bias: Recognise that all creators have their perspectives and biases. Be aware of any potential bias in the information presented and seek out diverse viewpoints to gain a more comprehensive understanding.
Check for context: Examine whether the information provided by the creator is presented in a broader context. Sometimes, taking information out of context can distort its meaning or impact.
Engage critically: Actively engage with the content by asking questions, seeking clarification, and participating in constructive discussions. This helps to deepen understanding and encourages the creator to provide more reliable and well-supported information.
Be open-minded: Remain open to new ideas and perspectives, but also maintain a healthy skepticism. Avoid accepting information without sufficient evidence or blindly following the opinions of creators.

According to Ujjawal Gadhvi, “To address this, just like we say, ‘Buyer beware’, it’s now time to say, ‘Viewer beware’. More so, because viewers have already started exercising caution while consuming the content of emerging creators. I believe that we as content viewers, must try to verify their educational qualifications, their past work experience, their subject matter expertise and whether creators share legit sources of information which they use to make the content. These four parameters can give the viewers at least some understanding on whether the creator is sharing something out of genuineness.”

Chandralekha listed 5 parameters to trust any content:

Always comment on doubts.
Research 5 external links at a minimum on Google
Talk to 5 people in your life
View other creator content to understand various perspectives
Value your money!

According to Vijay Nihalchandani, “The first thing that a content consumer should see is if the article is valid, and whether the information being shared is shared with the news link or the full article. Because what happens is when an influencer starts getting famous, people start trusting him/her and think whatever he/she shares is true. So, it is important for the influencer to also share the source of the information and as a content consumer, if I’m consuming it from many influencers, who I think are sharing a lot of information, I should be looking at the source and if I see a random source, then I shouldn’t trust the information.”