-By Samarth Dawar
” The market is a place where people are constantly trying to guess what other people are going to guess."
- John Maynard Keynes
Introduction
In recent years, a new breed of influencers has emerged in the financial world - Finfluencers.
These individuals use their platforms to educate and engage with audiences on topics
related to personal finance, investing, and economic trends. However, their increasing
popularity has sparked a debate on whether they are truly shaping finance for the better, or simply fueling frenzy in the market. Today, almost everybody's decisions, whether holidays, fashion, electronic gadgets, cars, etc. are all based on reviews of some influencer.
A recent survey by the Indian Social Media Exchange (ISMX) found that 72% of Indian
millennials and Gen Z investors use social media to obtain financial information and 63% of them have acted based on information from social media. This indicates the growing
influence of finfluencers in shaping financial decisions among young Indians. These
finfluencers can be primarily classified into three types- Personal Finance Finfluencers,
Stock Market Finfluencers and Trading Finfluencers. While some of them function with the main aim of spreading financial awareness to help their viewers, others operate with the sole purpose of selling their products or courses to their customers.
Rise of finfluencers
The rise of finfluencers can be largely attributed to the digital age, with social media providing a platform for individuals to share their financial knowledge and expertise. With the decline of traditional financial advisors and the distrust in financial institutions, more people are turning to finfluencers for financial guidance. These influencers often share relatable stories and practical advice that resonate with their followers, making complex financial concepts more accessible and engaging. They use platforms like Instagram and YouTube to share tips, recommendations, and strategies for managing money and building wealth.
Positive impact on society
The impact of Finfluencers on financial literacy cannot be denied. Finfluencers have a broad
reach, with followers spanning various age groups, income levels, and backgrounds. Their
content is accessible to anyone with an internet connection, allowing them to connect with a global audience and influence a wide range of individuals. By leveraging the power of social media , finfluencers can reach millions of people with a single post, making them a potent force in shaping public perceptions and attitudes towards finance, especially younger generations who may not have access to traditional financial education.
Finfluencers have helped break down barriers to finance by making it more accessible and
understandable to the average person. They have encouraged conversations around
important financial topics and motivated individuals to start saving, investing, and planning for the future. Additionally, Finfluencers have raised awareness about the importance of financial independence and long-term wealth building. Finfluencers have had a positive impact on many individuals, especially younger generations who may not have access to traditional financial resources. By providing free and easily digestible financial education, they empower their followers to take control of their finances and make informed decisions.
Additionally, finfluencers often challenge the status quo and encourage their followers to
think critically about their financial goals and habits.
Criticism of finfluencers
Despite their positive impact, Finfluencers have faced criticism for potentially fueling market
frenzy and promoting risky investment behaviors. Some skeptics argue that Finfluencers may not always have the expertise or qualifications to provide sound financial advice, leading followers to make uninformed decisions. Additionally, the quest for viral content and engagement can drive Finfluencers to prioritize entertainment over accuracy, flashy lifestyle choices over prudent financial strategies , potentially leading to misinformation.
Fininfuencers also face criticism for potentially encouraging reckless financial behavior or
promoting unrealistic expectations. For example, in 2021, a few prominent finfluencers were paid huge amounts for promoting Vauld, a Singapore-based crypto platform, and it was
marketed as a safe and great investment that could give returns higher than the stock market. However, only a few months later the company suspended all transactions and
investors lost lakhs of rupees, due to the carelessness of finfluencers. Further, several trading finfluencers charge subscriptions or premium from the viewer and add them to groups on Telegram and WhatsApp. These communities are used to share stock market advice, such as which shares are best to buy or sell. The investors are assured of guaranteed returns, but they lose money due to wrong tips,pump-and-dump schemes or manipulative practices.Finfluencers are unregulated, which exposes the investors to a higher level of risk when dealing with them.
In recent times, India's securities market regulator, the Securities and Exchange Board of India (SEBI) has cracked down on cases wherein these so-called Finfluencer first buy shares of a company and thereafter, circulate favourable messages about the same scrip through social media (via bulk SMS, YouTube, Instagram, Telegram Channel, etc.) among their thousands of subscribers, thereby inducing them to purchase those shares, artificially driving up the volume and prices of the said scrip. These financial influencers then sell their pre-acquired shares, thereby pocketing large amounts of profits for themselves. Finfluencers? Not just stock tipsters. They reel you in with short videos, then make money through ads, sponsorships, and selling their own courses (keeping the good stuff hidden!). They're less risky than investors, since their income relies on audience, not the market.
Regulations for finfluencers
As the influence of finfluencers continues to grow, regulators are beginning to take notice
and consider the need for stricter guidelines on financial advice shared on social media. It is
essential for finfluencers to be transparent about their qualifications, disclose any affiliations,
and provide accurate and unbiased information to their followers.While a decade-old
regulation exists to govern investment advisors , Presently, there are no specific laws or
regulations governing Finfluencer, though SEBI has indicated that it is working on a draft
regulation for those providing financial advice on social media platforms.
The future of finfluencers
Looking ahead, the future of finfluencers is likely to involve continued growth and evolution.
As more individuals turn to social media for financial advice, finfluencers have the
opportunity to shape the financial habits of a new generation. However, they must also
navigate the challenges of maintaining credibility, avoiding conflicts of interest, and adapting
to changing regulations in order to sustain their influence and impact. In the upcoming future
, it is crucial for influencers to uphold ethical standards and prioritize the well-being of their
followers
Navigating the World of Finfluencers
From my standpoint, Finfluencers have reshaped the way we think about finance and
investing, bringing valuable insights and education to the masses. However, it is important
for both Finfluencers and their followers to approach financial advice with caution and critical
thinking. By striking a balance between entertainment and education, Finfluencers can
continue shaping finance for the better without fueling frenzy in the market.
As long as finfluencers continue to prioritize transparency, integrity, and responsible financial
practices, they have the potential to positively influence a new generation of financially savvy
individuals.
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