The Financial Conduct Authority (FCA) is actively exploring whether the rise of social media financial influencers, or 'finfluencers', could be harnessed to tackle the UK's persistent investment gap. This engagement forms part of the regulator's broader strategy to understand and shape the evolving landscape of retail investing.
The FCA's Investigation into Digital Finance Culture
In a recent interview, Lucy Castledine, the FCA's Director of Consumer Investments, confirmed the regulator is scrutinising the role of online personalities. The core question is whether these influencers can be a force for good, encouraging a broader demographic to engage with investing, or if they primarily pose a significant risk to consumers. This probe is timely, given that only about 20% of the UK's adult population holds investments outside of pensions and property, a statistic that has shown little improvement over recent years.
The FCA's interest is not merely academic. It is directly linked to its ongoing work on the new Consumer Duty, which mandates firms to deliver good outcomes for customers. The regulator is keen to determine if finfluencer content, often informal and widely accessible, can be aligned with these principles or if it fundamentally conflicts with them. Castledine highlighted the challenge of content that blurs the line between entertainment, general education, and what constitutes a regulated financial promotion.
Navigating the Blurred Lines of Promotion and Advice
A central tension lies in the distinction between generic financial discussion and regulated activity. The FCA maintains a clear rule: any communication that amounts to a 'financial promotion' must be approved by an FCA-authorised firm. However, the dynamic and often ambiguous nature of social media content, from 'get rich quick' schemes to stock tips, makes enforcement complex.
Castledine pointed to the risks of influencers promoting high-risk products like cryptoassets or contracts for difference (CFDs) without the necessary warnings. The FCA has already taken action, such as intervening to have an unauthorised finfluencer's online content removed. The regulator is also focusing on the firms that may be operating in the background, using influencers as a channel to promote their products without ensuring proper compliance.
The issue is further complicated by the demographic most engaged with this content. Younger investors, often using intuitive trading apps, are a key audience for finfluencers. The FCA's research suggests this group may be more susceptible to taking higher risks, potentially influenced by charismatic online figures rather than traditional, regulated advice.
The Potential and Peril of Influencer Finance
Despite the clear risks, the FCA acknowledges a potential upside. Well-constructed, compliant content from trustworthy sources could play a role in improving financial literacy and demystifying investing for new audiences. The goal would be to steer people towards long-term, sustainable investment strategies, such as diversified funds, rather than speculative bets on single stocks or volatile assets.
However, the commercial reality often works against this. Castledine noted that social media platforms' algorithms tend to favour engaging, dramatic content, which is frequently at odds with the measured, long-term narrative of sound investing. The 'gamification' of trading through apps also presents a behavioural challenge that finfluencer content can sometimes exacerbate.
The FCA's path forward involves continued monitoring and enforcement against clear breaches. It also emphasises collaboration with tech platforms to improve the oversight of financial content and working with authorised firms to ensure any influencer partnerships they engage in are fully compliant. The ultimate aim is to protect consumers while exploring if this modern phenomenon can, against the odds, help build a more inclusive investment culture in the UK.
