While social media influencers are not a new concept, having emerged in the early 2000s with the advent of YouTube, their reach has soared to unprecedented levels over the past decade. ‘Influencers,’ people who establish an online presence through personal reviews and recommendations of products and services, can now be found in every facet of consumer product marketing, and, as social media has become an ingrained part of daily life, influencer channels have never been more prolific, nor accessible. However, this increased reach and influence has prompted growing concerns about the vulnerability of audiences and the potential for dubious advertising practices.
The central concern with influencer marketing is visibility. As retail brands have become aware of the significant purchasing power of influencers’ audiences, it has become commonplace for influencers to undertake a business relationship with key brands. Influencers frequently receive financial incentives, services, or goods in exchange for their promotion. However, regulations have struggled to keep pace meaning these promotions often occur under the guise of genuine recommendations, taking advantage of audiences’ trust.
Crucially, influencers have also begun to move into financial spheres, where they are termed ‘finfluencers’. There is growing concern around finfluencers promoting financial services and products without informing audiences of the sponsored nature of the post, which usually leaves no room for discussion of the dangers of such products, and the implications of such malpractice can be severe for trusting audiences.
To combat the potential for misleading marketing practices, the Advertising Standards Authority (ASA) recently implemented new regulations around advertorials. If an influencer is promoting a business on their behalf, such advertisements must be clearly identified through the use of #ad or similar indicators.
While the ASA’s advertising regulation spans a wide range of influencer industries, the recent rise of ‘finfluencers’ has been of particular concern. The Financial Conduct Authority (FCA) undertook a public consultation last year around the sway of influencers within the marketing of financial services and products. Results found that influencer advice, especially around the marketing of investment and credit products, was often misleading and biased – a concerning dynamic made more prevalent by social media being dominated by younger users who may be more inclined to trust such information. In that light, the FCA has released vital new guidance to structure social media customer communications to ensure audiences are safeguarded and not misled.
Primarily, the guidance focuses on the need for the promotion of financial services and products to be clear and fair. Consumers need to be informed about potential risks as well as rewards, and information cannot be misleading or obscured, i.e., warnings cannot be tucked under a ‘read more’ caption label.
The FCA has also made clear its commitment to deter influencers from failing to meet these regulations. Finfluencers’ compliance will be continuously monitored, and multiple influencers have already faced reprisals from the FCA since the regulations were announced, with criminal charges brought against them.
Businesses partnering with influencers, therefore, need to proceed with caution – especially financial service providers. Businesses risk being tarred with the same brush if their partnered influencers fail to meet the FCA guidance, the ASA regulations, and any further rules specific to the product or service. Those with ongoing partnerships may consider requiring training for the influencer to ensure no regulations are accidentally crossed or consider contractual stipulations.
On the other side of the coin, not every promotion or recommendation is sponsored. Influencer brands are built on credibility and trust established through true recommendations, and it is inevitable that some financial endorsements are genuine. To avoid the risk of this independent activity negatively affecting a business, active monitoring will be vital for companies to stay abreast of all social media activity around their products.
The guidance from the FCA is a vital development within the consumer advertising sphere, and even more promising is its commitment to cracking down on non-compliant individuals. However, whether partnering with influencers or not, businesses must take care: accidental infringement of these new regulations could easily leave businesses and branding indelibly stained by the FCA’s ire.
Written by Michael Shaw
Partner, Marks & Clerk
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