27% of finfluencer content contain affiliate links: CFA Institute

Research published by the Chartered Financial Analyst (CFA) Institute has revealed that 27% of finfluencer content contained affiliate links. The majority of affiliate links signposted users to investment products and services, such as trading platforms and neobrokerages.

Finfluencers typically engage their audiences by simplifying intricate financial concepts and offering investment advice.

The institute's research indicates that over a quarter of finfluencers' content could be sponsored. Moreover, the study reveals that nearly a fifth of this content focuses on individual stock recommendations. This data is particularly relevant as regulators worldwide strive to manage and monitor the information shared by finfluencers.

The research also reports that the bulk of finfluencer content revolves around passive investment products, characterised by ETFs (Exchange-Traded Funds) and index funds.

According to the report, the regulatory status of the majority of finfluencers who endorse investment products or offer recommendations remains unclear, as none of them formally disclosed their regulatory status in the content reviewed. While a few finfluencers acknowledged they were not professional advisers, none specified whether they were a broker/dealer, a tied agent, or an authorised representative.

These designations would legally permit them to endorse products and services without being professional advisers. Consequently, it is probable that many of the finfluencers endorsing products or making recommendations were either not authorised individuals or were unaware of their obligations to disclose relevant information.

“Only 28 of the 110 content sources (25%) in the sample contained specific disclosures (such as marketing disclosures, whether the finfluencer received commissions or other forms of payment, or their professional status). Moreover, of the 35 pieces of content containing recommendations, only 7 pieces contained disclosures of any form (20%). Further, of the 40 pieces of content that contained investment promotions (6 of which were also recommendations), only 21 contained a disclosure,” the report noted.

This discovery is concerning because the absence of marketing disclosures likely violates both securities and advertising laws. Existing research on influencer marketing has also raised issues with the low rates of disclosure in marketing content.

Improper disclosures also lead to unfair competition at a structural level, highlighting the reputational and legal risks that both firms and individuals face.

Despite the fact that YouTube was the platform where the greatest proportion of disclosures were identified in the study, the majority of disclosures on the video app was reported to be inadequate in that they were not clear to audiences.

The report also added, “The low prevalence of disclosures among finfluencer recommendations and promotions is concerning given the ease with which these platforms enable content creators to include disclosures.”

The report also noted that one possible reason for the relative lack of disclosures is that influencers do not want to appear as too profit oriented because it could cause them to lose their audience if viewers judge the content to lack sufficient independence.