Financial Planning Fin influencers should be regulated.

Financial Planning
Financial Planning

Article by Phil

A report by CFA Institute has recommended that so called “fin influencers” offering Financial Planning online should be required to state their regulatory status.

Research found that on TikTok, YouTube and Instagram:

  • 45% of financial content contained guidance
  • 36% included financial promotions
  • 32% included Financial Planning

The Financial Conduct Authority (FCA) has introduced new legislation requiring the approval of financial promotions online. Not only online, but promotions made in print, any kind of broadcast media, websites, e mails or brochures.

Last year over 10,000 financial adverts were taken down as a result of the FCA’s action. Over 140,000 websites were scanned for content which led to 4,000 detailed reviews and 500 websites being taken down. They also identified 25 firms who had their applications for permissions denied, but were operating websites.

This had a positive impact in 2023, with investment fraud down by 40%. One of the reasons for this reduction is the co-operation of social media companies, who agreed to only allow paid advertising for investment products to be made by authorised investment firms.

It remains the case that online financial planning recommendations should never take place.

Fin influencers often promote unregulated cryptocurrencies. We’ve looked at crypto risk many times. But US based crypto exchange Coinbase have just announced that George Osborne has joined their advisory board. It seems crypto firms will spend any amount of money in their quest to become regulated as mainstream investments. Our view is still the same as the FCA’s view. You should expect to lose all your money, that way you can’t be surprised if you do.

It’s interesting that since the FCA took control of authorising crypto firms for money laundering purposes back in 2020, only 14% of applications have been approved. A total of 45 out of 320 applications.

There are also concerns about unregulated and unqualified advisers providing advice to people living abroad. There seems to have been a rise in advisers offering ISA’s to non UK residents, claiming that they are tax free, when they aren’t in many cases. Because this is happening outside the UK and the EU, it is very difficult for the FCA to take action. But if you are living abroad you should be wary and still use UK based advisers for your advice.

You can check whether individuals or firms are authorised to provide regulated financial planning advice, or even financial promotions, by checking the FCA website. The website now also includes a list of firms who are not authorised, who you should watch out for. This is on the FCA Warning List.

At the moment however, there is no easy way to prevent financial abuse. The Office for National Statistics estimates that 1.5 million people in the UK suffered financial abuse last year. The majority of these were elderly and vulnerable people.

The different types of financial abuse include:

  • Having your money or other property stolen.
  • Being subject to fraud.
  • Being put under pressure to part with money or property.
  • Having your money or property misused by someone else.

It can be difficult to tell when someone is the victim of financial abuse. But some of the things you should look out for include:

  • Making unusual cash withdrawals or unusual financial decisions
  • Not wanting discuss finances with close family or financial advisers
  • Making unexplained gifts to third parties without explanation
  • Changing a Will and disinheriting family or friends without explanation.
  • Unknown visitors appearing or even moving in.
  • Signs of withdrawal and deteriorating health.

There are some things that make financial abuse more difficult to achieve. One of the best ways is to have Lasting Powers of Attorney in place. These should involve trusted third parties like Financial Advisers or Solicitors.

Data from the National Fraud Intelligence Bureau revealed that scams involving “romance” increased by over 20% last year. Over 8,000 cases were reported, and individuals lost over £90 million. Men were more likely to be targeted, but women are likely to lose more on average. 54 to 65 years olds are the most likely to be susceptible to these types of scams. They are also difficult to prosecute because victims will often have transferred funds willingly.

Three men involved in a £12 million investment fraud scheme between 2016 and 2019 have now been jailed. The ringleader was jailed for five and half years and his two accomplices received suspended sentences. I wonder if this will act as a deterrent to others engaged in fraud schemes.

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