Across Instagram and YouTube, finance content creators or ‘finfluencers’ are shaping financial advice from general money tips to very specific advice regarding investment. Yet, it’s their pinpoint investment guidance that has garnered attention, particularly from industry stakeholders and the Securities and Exchange Board of India (SEBI).
SEBI has recently set regulations prohibiting regulated entities from engaging with unregistered financial influencers.
The regulatory body stated that persons who are exclusively engaged in investor education and do not, directly or indirectly, provide advice/recommendation/claim of return or performance, will be exempt from the new restrictions.
Industry leaders believe that this is a significant step towards protecting investors from misleading financial advice, ensuring that all financial influencers operate within a regulated framework.
During the pandemic, finfluencers rose to prominence as remote work allowed more time for trading and investing in financial markets. Since then, finfluencers, offering advice on personal finance, investing, and real estate through digital platforms, have significantly influenced their followers’ financial decisions.
However, their rise has also resulted in numerous cases of investors being misled. Some finfluencers have collaborated with brokers to attract more customers, often resorting to unethical practices.
Following a consultation paper released in August that sought public input on the matter, SEBI has taken action. The paper proposed that registered finfluencers should display their registration number, investor grievance helpline, contact details, and appropriate disclaimers on their posts. It also underscored that regulated entities should not compensate referrals based on their quantity.
SEBI clarified that although stockbrokers may pay limited referral fees to retail clients, extensive marketing and referral practices by unregistered finfluencers are will not be entertained.
Industry players back SEBI’s crackdown on finfluencers
In a conversation with Marketing Mind, Nisha Sampath, Managing Partner, Bright Angles Consulting LLP, said all finfluencers will have to work harder to show proof of their acumen whether they are registered or not. Unregistered finfluencers will need to acquire the necessary qualifications and skills, if they intend to make a living through this route.
Striking a similar tone, Lloyd Mathias, Angel Investor and Business Strategist, highlighted that it’s a positive step by SEBI because they are acknowledging the proliferation of self-proclaimed financial influencers who share stock tips and investment advice on social media, which is taken seriously by many.
“With India boasting approximately 4 crore retail investors, many individuals are susceptible to these influencers. This intervention seems beneficial in curbing potential pitfalls for investors. This move will likely compel influencers to seek accreditation and adhere to disclosure norms. It represents a positive step forward in ensuring accountability. However, my concern lies in its potential short-term disruptions to the current operational flow, which needs to be studied,” he said.
Furthermore, he went on to say that the long-term implication is that it should help alleviate some of the chaos caused by random synthetic influencers. Additionally, it will encourage financial institutions to enhance the quality of their communications, thereby providing better protection for investors.
“Ultimately, however, the onus remains on investors themselves. Personally, as an investor, I need to ensure thorough research on a company before making any investment decision, rather than relying on positive posts from undisclosed paid influencers,” Mathias added.
Pravin Shiriyannavar, COO, brand-comm, A unit of Madison World, mentioned that he doesn’t see it impacting the spend as SEBI’s regulations are not on spend but who you spend on. The ad spend will not reduce as the budget would be used on registered finfluencers. For any brand, it is the objective that is important and not the means to meet the goal.
Sahil Chopra, Founder and CEO, iCubesWire, emphasised that the move is certainly in the right direction. Influencers must be careful when putting out content or the content they promote, especially when it has financial implications.
“This regulation will help ensure that the content has some credibility to it. While the fintech space is significant in terms of ad spends, it isn’t the largest. Electronics, fashion, and healthcare take the lead in that aspect. We don’t anticipate this move substantially as overall ad spending in the BFSI sector,” he added.
Ritesh Ujjwal, Co-Founder, Kofluence, said, “SEBI’s new regulations are created to impact how influencers operate within the finance space. While it’s unlikely that we’ll see a substantial decrease in collaborations and ad spending overall, these regulations introduce a structured environment that promotes accountability among influencers. It will allow influencers to continue engaging with regulated entities such as brokers and mutual funds under specified conditions as per SEBI, which has created avenues for influencers to operate within these clear guidelines.”
“The exemptions provided by SEBI also enable influencers to receive funding through approved platforms, ensuring that the industry remains dynamic and accessible. As a result, unregistered influencers may be incentivised to register themselves, enhancing their legitimacy. This regulatory framework is expected to encourage influencer platforms and companies to prioritise collaborations with registered influencers, thereby improving influencer partnerships’ overall quality and trustworthiness in the financial sector,” he added.
Furthermore, he went on to say that the line between registered and unregistered finfluencers is blurred, as most currently operate without formal registration. To tackle this issue, SEBI and the Advertising Standards Council of India (ASCI) have strengthened their guidelines, now requiring registration for influencers in the BFSI sector.
“However, effectively regulating the expansive social media space remains a significant hurdle. Platforms must innovate and deploy robust moderation tools to uphold fairness and transparency throughout the ecosystem,” he added.
Harish Bijoor, Founder, Harish Bijoor Consults Inc. said that SEBI serves as a regulatory watchdog and guardian within the financial sector. Their recent directives regarding financial influencers mark a significant step forward.
“By mandating registration, SEBI aims to uphold credibility and trustworthiness in this domain. This move is poised to marginalise unregistered finfluencers, thereby safeguarding investors who rely on financial advice. It underscores the greater responsibility of those influencing financial decisions. Regulating these influencers ensures a more robust and authentic financial ecosystem, ultimately benefiting small, trusting investors,” he added.
Meanwhile, in discussing the impact of SEBI’s latest regulation on ad spends directed towards unregistered financial influencers, Samit Sinha, Founder, Managing Partner, Alchemist Brand Consulting, said, “I expect ad spends on unregistered finfluencers to evaporate altogether.”
CA Sakchi Jain, Financial Educator, underscored that SEBI’s regulation aims to enhance transparency and protect consumers, which will likely prompt brands to prioritise collaborations with registered finfluencers who meet the regulatory requirements.
“Yes, I do expect a decrease in collaborations and ad spends on unregistered finfluencers. This shift will lead to a more selective approach in influencer partnerships. This will also force finfluencers to register with SEBI. This move marks a significant step in protecting investors from misleading financial advice and ensuring that all financial influencers operate within a regulated framework,” she added.
Furthermore, Jain stated that these regulations may initially seem restrictive, they offer an opportunity to elevate the standard of influencer marketing.
“By ensuring that influencers are knowledgeable and qualified, we can foster a more informed and confident consumer base. This change, though challenging, can lead to more meaningful and impactful collaborations that genuinely benefit both brands and their audiences. However, these regulations could also introduce challenges to our creative freedom,” Jain said.
“Compliance with SEBI’s guidelines may require us to adhere strictly to prescribed content formats and messaging, limiting our ability to experiment with new ideas or unconventional approaches. This regulatory environment might discourage some influencers from entering the market or sharing opinions that deviate from conventional wisdom, potentially stifling innovation in financial education,” she added.
Sharan Hegde, Influencer and Co-Founder of 1% Club stressed that through new SEBI guidelines, a lot of misinformation has been clarified and the industry finally has clarity on how to move forward.
“It definitely marks a significant shift for financial influencers, particularly affecting the stock market and trading influencers who rely on affiliate income from brokerage platforms. While influencers focusing on personal finance education may see minimal impact, those promoting stock market and trading activities face a re-evaluation of their revenue strategies. Some brokerages have already ceased affiliate deals, signaling a broader industry shift. To sustain careers in this evolving landscape, influencers are advised to obtain necessary licenses and thereby establish legitimate entities compliant with SEBI regulations,” he said.
“This sets a clear path forward, emphasizing ethical adherence to SEBI regulations among influencers. It’s now an opportune moment for more influencers to contribute to financial education and foster transparency in investing across the country,” Hegde added.
How SEBI’s directive will shape fintech advertising
According to Sampath, fintechs will definitely pause and re-evaluate associations until the broader implications of SEBI’s directive are fully understood.
“Consumers are already aware that influencers endorse brands for a fee and this is eroding credibility of brands and influencers alike. Going forward, associations for marketing need to be transparent, and accompanied by disclaimers. Maybe it will be boring and look like conventional advertising, but it will be compliant,” she added.
Jain believes fintech advertising will become more structured and regulated. Brands will need to be more diligent in verifying the credentials while collaborating with influencers. They would prefer collaborating with Influencer who are registered and possess relevant qualifications, ensuring that the information shared is accurate and reliable.
“Campaign strategies will likely incorporate more educational content, leveraging the expertise of qualified finfluencers to provide value-driven insights rather than purely promotional messages,” she added.
Sinha said, “I would imagine that we will see more restraint in the content of fintech advertising rather than a reduction in ad spend. It will serve the entire fintech category well if there is less hyperbole in their advertising. Otherwise, the category as a whole will suffer from a trust and credibility deficit. Even though the category responds best to rational, factual communication, there is definitely room for subtle emotional hooks in the advertising, with or without influencers.”
Furthermore, he stated that innovations thrive most when there are restrictions. It is in the self-interest of the industry to establish trust and credibility, rather than let a few dodgy players damage the perceptions of the category. This move will help establish certain minimum standards of ethicality in the category of advertising in the long-term.
Similarly, Chopra highlighted that fintech advertising will likely become more regulated. Influencers will need to be more transparent and responsible for the content they promote.
“Campaign strategies will be tweaked to prioritise influencers who are registered and comply with SEBI’s guidelines. This shift will ensure higher credibility and trustworthiness, ultimately benefiting both the influencers and the brands they represent. We can expect a more cautious approach in selecting influencers, with a preference for those who are registered and can provide verifiable credentials,” he said.
Chopra also pointed out that displaying qualifications and registration details will amp up the credibility of influencers. It will ensure that only knowledgeable and certified individuals are promoting financial products, thereby building consumer trust.
“This requirement could set a benchmark for other sectors, leading to a more regulated influencer marketing landscape. Influencers in other sectors might also be expected to showcase their expertise and credentials, which could improve the overall quality of content,” he added.
Shiriyannavar said, “In my view, an increasing number of influencers would focus on meeting the eligibility criteria to be finfluencers. The market will see more qualified influencers coming in and more verified inputs to the end consumer.”
Furthermore, he said that fintech brands have always sought to stay within the framework laid out by the regulators.
“Our recommendation to our clients is always to prioritise building trust and not just business. As consumer trust in a brand is the asset that is built for the long-run, companies laying greater focus on business than on their brands might be facing tough times soon,” he added.
Ujjwal pointed out that given SEBI’s directive, advertisers and marketers will become more selective in choosing influencers, focusing on those who align closely with their brand values and maintain a strong reputation.
“What we see here reflects a natural demand-supply dynamic, with brands preferring registered influencers that demonstrate credibility and compliance with regulatory standards. As a result, unregistered influencers may find it challenging to secure brand collaborations, prompting them to register to enhance their authenticity and appeal to brands,” he said.
“Moreover, we may also see a change in how finfluencers showcase their content, addressing concerns raised in the SEBI guidelines. Instead of focusing on clickbait and catchy content, there could be a shift towards more straightforward and informative content. This evolution in influencer behaviour aims to align with regulatory expectations and foster a more transparent industry,” Ujjwal added.
Impact beyond finance
While considering the possibility of similar regulations being extended to other sectors such as skin care or health, Sampath said the health category especially demands more regulation as it’s a high risk category with potentially fatal consequences of wrong advice being given or taken.
“In the long run, we will have to see how brands re-imagine influencer associations. Maybe, they will make more conventional style ads, treating them as endorsers, or partnering to create branded co-sponsored content,” she said.
“In certain categories like finance and health, regulations are necessary as consumers stand to lose a lot if they are misguided. In the long run, more honesty and transparency is in the consumer’s interest and ultimately, it benefits brands if they take this approach, as it positively impacts their equity and builds trust,” she added.
Echoing similar sentiments, Sinha said that he welcomes any move that serves consumers’ best interests and protects them from being misled by unprincipled players, especially in categories that rely heavily on exploiting insecurities.
Ujjwal mentioned that if SEBI’s approach towards influencers were extended to sectors like skincare or health, a thoughtful adaptation of influencer marketing strategies would be necessary.
“Firstly, we must ensure that influencers in these sectors adhere to similar regulatory standards to maintain credibility and trustworthiness. This would involve rigorous vetting of influencers to confirm their qualifications and expertise and compliance with any regulatory guidelines specific to skincare or health products,” he said.
“The challenge we would face is this: unlike financial products and services, which operate under regulatory frameworks, skincare or health products are typically promoted based on personal experiences and perspectives, often without substantial data to support them. It is essential to strike a harmonious balance between personal anecdotes and an evidence-based approach where influencers can share their authentic experiences while maintaining transparency and credibility in their messaging. This way, influencers can connect genuinely with their audience while promoting products or treatments responsibly,” Ujjwal added.
Meanwhile, Chopra emphasised that adapting to such regulations in skincare or health would require a solid verification system for influencers.
“We would need to ensure that influencers are backed by the necessary qualifications and certifications. The challenge lies in the scale of social media and the difficulty in moderating content at an individual level. Platforms would need to develop methods for ranking the content and sentiment analysis to help with this. It might also require collaborations with industry experts to double-check the content shared by influencers,” Chopra said.
Jain emphasised that if SEBI’s approach extended to sectors like skincare or health, she would adapt by ensuring that all collaborating influencers are verified experts in their fields. This might involve working with certified health professionals or dermatologists rather than general influencers. The main challenge would be finding qualified individuals who also have a strong online presence and influence.
Shiriyannavar emphasised that SEBI’s directive on influencers may trigger similar regulations in other sectors too as there are many content creators who are releasing content that might be unverified and without any credible backing.
“This is misleading and at times confuses the discerning consumer. Like ethics is taught in journalism schools and practiced by many reputed media houses, there will be a need to bring about ethical practices in content creation,” he added.
