The creator economy is booming, leading to an influx of influencers advising followers on a host of things that impact their lives.

A new breed of influencers, known as finfluencers or financial influencers has landed in the crosshairs of the Securities and Exchange Board of India (SEBI).

These finfluencers seem to have held their followers in thrall, doling out financial advice that is lapped up by their huge following without a thought.

They have been accused of manipulating the market, giving out unqualified advice and earning huge commissions from these platforms and from the market by transacting on the stocks they spoke about.

e4m had earlier reported that SEBI will be finalizing a draft discussion paper on guidelines to regulate financial influencers or finfluencers who give out such unqualified investment advice. Reports say that the draft will be out in the next couple of months.

With the growing concern of the influencers wrongly guiding their followers and putting their hard-earned money at risk, SEBI has taken a stand to regulate the unorganized sector and bring a semblance of order within the chaotic sector.

We reached out to creators and experts to understand whether SEBI's steps to rein in these finfluencers may work.

Finfluencers and their influence

Followers repose a lot of trust in the finfluencers who present themselves as experts in the matter of finance.

By appearing relatable and simplifying complex financial terms that intimidate the general public, these influencers win audience trust and are perceived as credible source of information.

Preety Singh, Co-Founder and Managing Director of Boomlet Group explained: “Influencers are held in high regard by their followers due to their perceived authenticity and their ability to present content in a clear and relatable manner. This phenomenon extends to the widespread popularity of Finfluencers as well. These individuals excel at simplifying complex financial topics into easily digestible information for their audience.

"The realm of finance is inherently sensitive, yet some people invest their trust in Finfluencers for advice. It is crucial, therefore, for Finfluencers to reciprocate this trust by providing authentic and reliable information.”

Finfluencer and founder of Unfinance, Kunwar Raj Singh said, “Finfluencers have become a credible source of financial information largely due to the accessibility and relatability they offer. Traditional finance education can be daunting and often laden with jargon that makes it inaccessible for a majority of the population. Furthermore, they typically share practical experiences and real-life examples that resonate with their audience.”

“However, it's important to note that credibility varies widely among finfluencers. While some may have formal training or extensive experience in finance, others may be more amateur in their understanding and sharing of financial concepts. Hence, the responsibility falls on the viewers to verify the information and, where possible, seek professional advice”, he continued asking audiences to cross-check before exploring.

The need for regulation

Every now and then, ASCI brings out guidelines for influencers to restore a semblance of order in a vastly unorganized system. But is there a requirement to have separate guidelines for finfluencer from a statutory body like the SEBI?

“There is a lot of subjectivity and the data backing any such recommendations is at best average therefore there is a big need since there is people’s money involved. There is a need for guidelines for two categories -- health & wellness, and finance”, said Kalyan Kumar, CEO and Co-Founder of KlugKlug.

He also warned against finfluencers with agenda against competitors who may get their followers to act without thinking twice.

Singh of Boomlet Group said, “By acknowledging the need for governmental oversight in the realm of finance, we are acknowledging the importance of safeguarding individuals' interests and creating an ecosystem of transparency and trust. This recognition further highlights the necessity of encouraging awareness among the public to distinguish between reliable and unreliable sources of financial advice.”

Can SEBI rein in the finfluencers?

Given the vast sea of influencers and the unorganized nature of the space, putting SEBI's proposed guidelines into action may seem like a daunting prospect.

Kumar of KlugKlug said that it is going to be a difficult task but all the stakeholders have to collaborate in order to have a fair-square business with audiences being the heart of it.

He said, “This is true that it is going to be tough but that’s when platforms like us can help. We can help using technology.”

While on the other hand, finfluencer CA Jai Desai, had some suggestions for SEBI as a content creator from the space. He said, “Indeed, it is a complex task to keep tabs on every individual and their online activities. In such cases, a multifaceted approach can be adopted. Regulatory bodies can focus on creating clear guidelines and standards for Finfluencers to adhere to, ensuring they provide accurate and responsible financial information. These guidelines can include requirements for disclosure of sponsorships, conflicts of interest, and disclaimers about the limitations of their advice.”

“Implementing measures such as content moderation, reporting mechanisms, and algorithmic checks can help identify and flag potential violations. Ultimately, a combination of proactive regulation, public awareness, and responsible behaviour from Finfluencers themselves can contribute to a more secure and reliable environment for financial information on the internet.”

“The anticipated guidelines are expected to serve as a comprehensive framework for regulating the Finfluencer space. The primary objective of these guidelines will be to safeguard individuals from deceptive or inaccurate information. By providing a clear set of reference points and rules, the guidelines will empower Finfluencers to create authentic and reliable content for their followers," Singh of Boomlet Group said.

“Through the implementation of these guidelines, a more regulated and responsible Finfluencer ecosystem will be fostered. It is expected that Finfluencers will be encouraged to engage in responsible behaviour, verify the accuracy of their content, and provide clear disclosures about any conflicts of interest.”