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In a fast-evolving digital landscape, social media influencers, or “finfluencers,” have become an increasingly popular method for financial organisations to reach new audiences. However, this comes with significant regulatory challenges.
The FCA has observed that nearly two-thirds of 18–29-year-olds follow social media influencers, 74% of those said they trusted their advice and 9 in 10 young followers have been encouraged to change their financial behaviour, highlighting the internet’s prominent role in enabling fraud.
On 22 October 2024, the UK’s Financial Conduct Authority (FCA) announced that 20 finfluencers are being investigated under criminal powers, with 38 additional alerts issued against unlawful promotions. This marks a strong stance by the FCA to crack down on finfluencers promoting financial products without proper authorisation. For financial firms engaging in affiliate marketing, understanding and aligning with these new guidelines is essential to avoid costly repercussions.
In this article, we’ll explore how affiliate marketing in the financial sector works, the latest FCA regulations, and the importance of using compliance tools to keep communication in line with legal standards.
This challenge in marketing communications has driven many wealth managers and investment platforms to explore affiliate marketing as a way to reach audiences more authentically, particularly through partnerships with influencers who have built trust with their followers.
However, leveraging affiliate marketing in such a highly regulated field is not without its risks. While affiliate marketing offers an engaging, relatable avenue to introduce financial products, firms must ensure that every affiliate—particularly social media influencers or “finfluencers”—fully understands the compliance requirements specific to financial promotions.
This makes it essential for firms to take proactive steps, educating and closely monitoring affiliates to prevent any misleading information from being shared. By doing so, companies can harness the reach of affiliate marketing while staying firmly within the FCA’s compliance framework, avoiding regulatory missteps and protecting both their brand and their clients.
Companies need to avoid any language that could be perceived as misleading or overly optimistic, as it could create unrealistic expectations among consumers. This careful balance between promoting products effectively and adhering to regulatory standards is even more complex when finfluencers are involved, as they could lack deep industry expertise and may inadvertently communicate in a way that misinterprets risks or oversells benefits.
With the FCA’s new guidelines on finfluencer marketing, investment platforms are under increased pressure to ensure that every message aligns perfectly with compliance standards, making this an area of ongoing vigilance and adaptation.
The FCA has been vocal about its concerns regarding social media finfluencers promoting financial products without the necessary authorisation. Key guidelines announced include:
What constitutes a financial promotion?
A financial promotion can take any form (e.g. a social media post or direct messaging) if it includes an invitation or inducement to engage in investment activity.
The communication must be made ‘in the course of business’, meaning the influencer must have a commercial interest in it. However, this does not refer strictly to direct compensation – it can include:
What can be held liable?
Influencers will be in breach of Section 21 if they are:
Under the Financial Services and Markets Act 2000 (FSMA), financial promotions must either be communicated by or approved by an FCA-authorised person. This law applies to both the firms using affiliate marketers and to the influencers themselves. Any failure to comply could lead to significant penalties, including imprisonment or fines.
For financial firms, non-compliance with FCA regulations can have far-reaching consequences. Under the FSMA, if a firm is deemed to be "causing" a non-compliant promotion (for instance, through an influencer’s post), it could be held liable. This means that any promotional content shared by finfluencers on behalf of a firm must meet all regulatory requirements to ensure consumers receive fair and balanced information.
There are also reputational risks. As the FCA steps up its efforts against non-compliant promotions, firms found to be associated with misleading communications could suffer from damaged credibility and reduced consumer trust. Furthermore, given the FCA’s recent clampdown, it’s likely that consumers are becoming more aware of these issues, and may scrutinise financial promotions more closely.
To protect both their customers and their business, financial organisations should take proactive measures to monitor and manage affiliate marketing activities. Below are some key practices:
Given the volume and pace of content produced by affiliates and influencers, monitoring for compliance manually can be challenging. This is where AI-powered compliance tools can be highly valuable.
Here’s how our dream tool looks like (and we’re in the process of building it, too) - By automating the review process, the tool can quickly identify non-compliant communications, flag risks, and suggest adjustments to ensure regulatory alignment. Here’s how the tool can simplify compliance management:
At Zango, we're just getting started. Today, our AI model not only learns from user prompts but actively scans for relevant regulations tailored to organisations, thereby automating the tedious process of Horizon Scanning for companies. Plus, our AI co-pilot is equipped to handle regulation-related questions seamlessly and provide insights for gap analysis based on existing internal processes.
Our vision for the future? A comprehensive tool that covers the entire compliance process—from staying updated on the latest regulations to continuously monitoring the content rolled out by marketing teams.
Keeping up with compliance has never been simpler; automate compliance processes
