Affiliate marketing for financial products just got harder

Social media influencers are trusted by Millennial and Gen Z followers. They discuss personal finance and often promote financial products. If so, they are dealing with affiliate marketing and are called ‘.finfluencers

Suggesting the business model, stock or EFT (Exchange Traded Funds) that many people use; and/or providing affiliate links to stockbrokers and fund managers who pay commissions for each referral.

The Australian Securities and Investments Commission (“ASIC”) regulates financial products for the protection of the public. ASIC laid finfluencers warn that they must comply with the law when advising or expressing opinions on investing in financial products on social media. For ASIC, complying with the law means holding a financial services license and making sure that no misleading information is provided.

They focused finfluencers because they are reliable.

According to ASIC Media Publication 22-054MR (March 21, 2022):

“In 2021, the ASIC youth and money survey found that 33% of 18-21 year olds follow at least one financial influencer on social media. The survey reported that 64% of teens have changed at least one of their financial behaviors as a result of following a financial influencer.

ASIC has published 269 Fact Sheets (INFO 269) containing guidance advice for social media influencers when discussing financial products and services online or promoting affiliate links.

This article includes a summary of the Fact Sheet, ASIC’s recommendations and examples. This is followed by marketing commentary by Michael Field, a marketing consultant.

Issue #1 What is financial product advice?

Financial product advice a recommendation or statement of opinion Influencing a person to buy, hold or sell a financial product such as a stock or mutual fund. It does not share real information – financial education.

Examples of suggestions and opinions:

“I’m going to share with you five long-term stocks that will do well and that you should buy and hold.” [a recommendation]

“ETFs will give you a guaranteed positive return.” [an opinion]

Examples of real information:

“You can invest by buying shares – that means you’re investing in a company…

ETFs, on the other hand, can track different asset classes… but the ETF provider owns the shares or assets on behalf of the fund members.” [educational information]

“You can save money each week by making your own homemade lunch for work instead of eating out.” [a tip]

Issue #2 Is this a financial service?

A financial service arranges for someone to buy or sell a financial product. Affiliate marketing links, i.e. sharing a bridge for followers to access a platform to trade or trade for investments, is a form of financial service called ‘trading by edit’. Unlike health influencers who can provide affiliate links if they disclose that the link is sponsored, finfluencers not protected by disclosing that the affiliate link is sponsored.

Example and advice on trading by editing:

“You are promoting a link for your followers to access an AFS Licensee’s trading platform to trade financial products. It is a unique link that cannot be accessed anywhere else.

You receive a payment from the licensee for each click that results in the use of the platform.

People who access the link also get an edge in purchasing products because of your unique link.” [the active involvement in the transaction makes it dealing by arranging]

Example of not trading by editing:

“You provide the names and details of the Australian Financial Services (“AFS”) licensees, which have a platform to trade financial products.” [simply providing the names and details of a third-party platform or financial firm, without being involved in the transaction is not a breach of the law]

Problem #3 Misleading advice?

Is the overall impression given by the advisory statements misleading or deceptive? Estimates of future returns or level of risk should be made on reasonable grounds (verified). Otherwise, the estimates can be misleading.

Examples of misleading statements:

“Holding this stock for the long term will yield significant returns and is just like putting your money in a bank!” [‘significant returns’ is unsubstantiated, ‘like a bank’ gives a misleading impression of safety]

“Trading in this derivative is a risk-free way to make a quick profit – I’ve earned $$$$ by trading these alone.” [‘risk free’ is unsubstantiated, the $$$$ must be true]

An example of a non-misleading statement:

“ETFs offer good diversification across different asset classes, but there are still risks of depreciation of the market or industry the ETF is tracking.”

ASIC’s advice and general comments

Finfluencers Unless they hold an Australian Financial Services License (AFSL) or are a licensee’s authorized representative (ie unless properly trained and monitored) or media commentators or (in some cases) provide a “non-financial advice” statement.

Having an AFSL will provide protection with respect to Issues 1 and 2, but not to Issue 3. An AFSL will not protect against giving misleading advice.

if finfluencer If they receive a commission or sponsorship, they may be required to disclose that the post is sponsored content.

Just finfluencer While complying with the law, the financial product provider, finfluencer is legal. Specifically, to make sure they don’t offer unlicensed financial services. And if the financial product has design and distribution obligations, it can only be promoted to consumers in the target market.

ASIC’s approach warn finfluencers Your law.

ASIC Commissioner Cathie Armor warns: ‘ASIC monitors online financial discussions selected by influencers who feature or promote financial products for misleading or deceptive statements or unlicensed advice or trading. If we see that harm has occurred, we will take action to enforce the law.’

The ‘act to enforce the law’ is a reference to the Companies Act, which ‘imposes significant penalties, including up to five years in prison for an individual and financial penalties of up to millions of dollars for a company.

Marketing Commentary Michael Alan from YestField Partners

origins ‘Influential Marketing’ traditional advertising is celebrity endorsed.

For example, a high-profile athlete might be paid by a brand to approve a breakfast cereal or multivitamin product. In this example, there is a reliable correlation between the celebrity’s expertise as an elite athlete and the importance of a healthy and nutritious breakfast cereal or vitamin supplement.

Celebrities engaged in such product endorsements are often referred to as: ‘Brand ambassadors’. These regulations are generally okay, provided the brand ambassador doesn’t make false or misleading claims about the product.

‘A relatively new concept’online influencers‘ has dramatically changed the landscape for brands and marketing activities. The rapid adoption of smartphones, coupled with the rapid rise of social media and the democratization of essential tools for content creation, such as low-cost video production and editing tools, has changed the definition of smartphones. influential “Anyone who has a large following online, regardless of their credentials”. Redefining the influencer based on the following is likely harmless in non-harmful categories such as: beauty, cosmetics and fashion. However, it carries the risk of harming consumers in critical categories. health, medicine, nutrition and monetary recommendation.

2019 has been a tipping point for online ad spend. By forbesadvertisers spent $129.34 billion on digital ads versus $109.48 billion on traditional advertising: including all non-digital options such as television, magazines and newspapers.

Brands flocked to online influencers Targeting consumer interests regardless of the spokesperson’s caliber, credentials or qualifications. This is in stark contrast to older consumers, who have more respect for authority, mainstream media, big corporations and government. Young consumers are more likely to trust a celebrity – an actor, model or singer – than an authority.

The ASIC research, showing that 64% of teens changed at least one of their financial behaviors after following a financial influencer, is a strong endorsement of the changes ASIC has implemented. Financial services brands and marketing teams should heed the warning and review all brand ambassador, influencer and sponsorship arrangements to ensure they are in line with the new guidance.

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