Finfluencers have become a vital part of the personal finance ecosystem, playing a significant role in raising awareness and disseminating financial advice. While their widespread reach and loyal following facilitate distribution, concerns arise regarding the quality and reliability of the recommendations provided at scale, especially after the recent P.R. Sundar saga.
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Notably, Securities and Exchange Board of India (SEBI) on May 25 penalised and barred P.R. Sundar from trading for a year over alleged violation of investment advisers norms. In a case that dates back to 2022, Sundar, his company Mansun Consulting, and co-promoter of the company Mangayarkarasi Sundar, have settled with the SEBI complaints alleging they were providing investment advisory services without the requisite registration from the regulator.
Finfluencers under scanner
There has been an increased watch on the financial influencers as many unethical trading practices have been noticed in the market. Government officials and regulatory bodies are, hence, looking on ways to regulate the actions of these individuals.
The measures taken
SEBI has expressed its intention to introduce regulations since January 2022, but no official guidelines have been issued thus far. The market regulator has, however, recently prohibited mutual funds, registered investment advisors (RIAs), and research analysts (RAs) from issuing advertisements through influencers with more than 10 lakh subscribers.
Last month, Finance Minister Nirmala Sitharaman too addressed concerns related to financial influencers in India and warned of the dangers of ponzi apps offering financial solutions. She noted though there is currently no proposal to regulate "fin-fluencers,” a word of caution is essential.
"If there are three or four people giving us very objective, good advice, there are seven others out of 10 who are probably driven by some other considerations," she said.
In a recent announcement, though the Reserve Bank of India (RBI) said that there are no immediate plans to introduce regulations governing the activities of finfluencers.
Question of 'credibility'
While there is no doubt that the financial influencers have taken personal finance and its related subjects like equity, fixed income commodities, F&O, taxes etc. from the select confines to the masses, Vijay Chandok, MD & CEO at ICICI Securities, believes there is also enough evidence of many of them peddling misinformation, luring gullible first-time investors to undertaking risky market bets, or promoting trades that benefit only themselves.
"Many so called ‘finfluencers’ aren’t SEBI registered and clearly operate in the dark. So, we always advise our customers to only deal with SEBI registered advisors and do their own research before parting with their hard-earned money. There are credible names in the ecosystem and investors should do their due-diligence before following them or acting on their advice," he told CNBC-TV18.com.
A piece of 'advice'
Anand Dalmia, Co-Founder & CBO at Fisdom, said the primary product offered by finfluencers comprise recommendations and advisory services.
"To ensure the integrity of these offerings, it is crucial for finfluencers to undergo extensive formal and experiential learning. By acquiring a strong foundation in financial knowledge and honing their analytical skills, finfluencers can ensure that their recommendations are backed by thorough research and rigorous analysis," he said while talking to CNBC-TV18.com.
He added that collaborating with regulated and qualified professionals can further enhance the credibility and depth of their advice. This collaborative approach combines expertise and distribution, ultimately benefiting consumers seeking reliable financial guidance.
Nevertheless, in today's caveat emptor environment, the responsibility for distinguishing opinions from facts and verifying the credibility of advice ultimately lies with the consumer.
"While regulatory bodies continue to address gaps in the ecosystem, it is equally important for individuals to remain alert and exercise critical thinking when consuming financial content," he said.
