Briefing: Financial lines brokers must watch out for increased scrutiny of ‘finfluencers’

By Yiannis Kotoulas

You’d have to have been living under a rock if you work in the insurance industry and have not yet noticed the FCA’s increased regulation of the sector in recent years. 

The regulator has repeatedly noted that it intends to become more assertive around enforcement, with its new landmark Consumer Duty having come into force earlier in the summer. 

But Consumer Duty does not just impact the insurance industry – it actually sets out a slew of new protections for consumers and requirements for firms operating in all financial services sectors across the UK. 

The FCA’s focus at the moment is very much on consumer protection, which it what led it to publish a warning in July that it would crack down on so called finfluencers – financial influencers – who promoted financial products online via social media. 

In a statement, the FCA noted that it had observed examples of firms lacking proper controls to manage their online promotions and make sure these influencers understood the products they were promoting. 

It even added that memes, which have quickly become prominent in the crypto sector, were capable of being classed as financial promotions.

In its consultation on the subject, the regulator explained: ”The requirement to be fair, clear and not misleading means there should be balance in how financial products and services are promoted, so that consumers are informed not only of the potential benefits, but also of the relevant risks.

”Firms should consider the appropriateness of character-limited media as a means of promoting complex features of financial products or services.”

Broker reccomendations

You may have seen them in your social feeds – convincing-looking social media personalities talking to the camera and promising the world in terms of return on investments from newfangled strategies such as cryptocurrency trading. 

However, these influencers have attracted the attention of the FCA.

Speaking to Insurance Times, Hannah Durrant, the fintech team leader at CFC, said that brokers working in the financial lines space should make sure their clients were aware that the regulator was sitting up and taking notice of this sort of social media marketing. 

Durrant explained: ”At the end of the day, most of the products these finfluencers are marketing are targeted at retail investors and consumers that don’t necessarily have the experience or the knowledge to enable them to use them properly.

“With social media in general, we’re in the Wild West. There needs to be something that protects the end consumer because these influencers are targeting young people.” 

Financial lines brokers have a role to play in educating their clients on the developing regulatory risks here – in their interactions, particularly with financial technology customers, brokers can draw on their own experience of complying with Consumer Duty to explain that this form of marketing could land them in trouble in future. 

Durrant added: ”I think the FCA will directly target the companies that are paying for these influencers to advertise for them, so there will be repercussions for them too.”

It remains to be seen what the FCA’s consultation will result in, but most in the insurance sector will be aware that regulation tends to be forthcoming whenever the FCA sets its sights on reform.