The Influence and Threat of Financial Influencers

My big boss Christopher Tan shared his comments regarding the emergence of “Finfluencers”, whether they pose a threat to the financial industry and whether they should be regulated in this Today’s article:

Emergency of ‘finfluencers’ helps raise awareness about finance, but license advisers question knowledge, partiality of some >>

The papers usually take a portion of your viewpoint, and some might be taken out of context.

So here is what Chris said in full:

1. What are your views on financial influencers?

In my view, the advent of financial influencers has raised the general financial and investment literacy of the general public. In this regard, this is a good thing. But at the same time, there is also a possibility that some financial influencers may not have deep enough financial knowledge or experience and end up advocating certain personal philosophies and financial products that may not be sound or backed by evidence. This will not be good for their followers because financial influencers wield a particular influence on their readers.

I generally believe that it is good to have financial influencers. I don’t see them being a threat to the financial advisory industry. Of course, if you are an adviser focusing on selling a product, you may not like these influencers because they may add much more value than you. But you have nothing to fear if you are a well-trained and competent adviser who can give good advice and guide your clients to make sound financial decisions that enable their life goals. In fact, you can work with them to better educate your clients.

2. Do you think the existence of financial influencers gives you an unbalanced playing field since licensed financial advisors like yourself have to play by more rules than these influencers?

Personally, I don’t see it that way at all.

This is because I don’t see financial influencers or institutions like Providend playing the same role.

As an example, Providend is an independent wealth advisory firm. We help our clients individually to achieve their life goals by understanding their unique circumstances and provide them with customised wealth advice. Clients pay us a fee for doing that. They are our paymaster. Because of this, we have a fiduciary duty towards our individual clients and therefore, we need to be licensed by MAS.

Financial influencers do not advise individual clients. They provide general financial and investment education as well as awareness. They are not paid by their readers or followers. Instead, they are paid through ads placed on their websites or when they write or published through their YouTube channel n products or services by their advertisers.

In a way, they are like mass print and broadcast media. The advertisers are their paymasters. Their readers and followers are not taking personal advice from them. Therefore, financial influencers do not have a fiduciary duty towards their followers.

They can’t because they do not know their individual circumstances. This is why they are not licensed.

So licensed financial institutions don’t play by more rules relative to financial influencers. We play by different set of rules. And even if we play by more rules, it is only necessary because we are supposed to have much more influence on our clients than influencers. We are the subject matter experts, not the influencers.

3. Or do you think it is good that these influencers are raising awareness on managing and growing wealth and promoting financial wellness?

I definitely think it is good.

And they have definitely contributed to the raised financial literacy and awareness in Singapore.

The only caution I have for influencers is that they need to be aware that they have a responsibility towards their followers.

Even though they are not advising them individually and they do not owe a fiduciary duty to their followers, they have a strong influence over them. So they need to really invest time into growing their own knowledge and experience and be very careful before they endorse any financial products or advocate them.

Do not do it just for profitability’s sake.

4. Do you think financial influencers should be regulated?

Since influencers are not advising, they should not be regulated under the Financial Advisers Act.

But in order to make sure that they are held responsible for what they put out there, just like newspapers and television, perhaps they should be governed by the Info-Communication Media Development Authority.

But we should not regulate everyone.

If you want to be a blogger to blog down your own learnings and experiences, I don’t think there is a need to regulate this person. Too much regulation can stifle creativity. But once your blog gets more eyeballs and you want to make a profit out of your blog by allowing advertisers to put up ads or you want to endorse financial products, I think that is when you need to be regulated.

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I think Chris nailed most of the points. He has experience both from the financial industry perspective, from marketing and working with us in the past, and being a consumer of content like this (he probably watches too many TikToks) to give a balanced view.

I think that if you feel threatened by influencers, you may have anxiety over your ability to communicate and advise clients. This can be a gap in your communication skills, bedside manners, execution and, worse, a lack of adequate financial sophistication.

If your client or prospects find entertainers like us more engaging and relatable and learn more from us, does that dilute your value to them?

That question will eventually be answered by whether they continue to pay you.

We work based on a different payment model, which is advertising, but even I admit that a lack of financial sophistication and too much entertainment can be dangerous. But in a way, we have to get paid in some ways. It is like telling you to work in your civil service job based on your passion and not paying you enough. Eventually, you will need to put food on the table.

I guess many see this kind of entertainment as a part-time thing but if someone were to do this seriously as a profession, they need to find a model to compensate them for the effort.

But if the service that you provide requires a degree of professional sophistication (be it medical, financial or legal), then you got to recognize that there are repercussions to providing poor service, poor advice, and wrong advice. If the repercussions are heavier, then the government will come to regulate.

That may not be a bad thing.

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