Risk Takes Backseat As Young India Finfluences

A survey of retail investors between 24-55 years of age who followed finfluencers brought an interesting fact about risk and returns to the fore. Only 39% prioritised risk, a majority - 51% - prioritised higher returns, and only 37% gave weightage to past performance, according to a survey by the CFA Institute.

Another interesting aspect was that 82% of investors who follow finfluencers act on their advice and 72% make profits.

Interestingly, 60% of the finfluencers were under 29 years of age, highlighting a shift in the manner in which financial content is generated and consumed.

Yet, only a fraction bothers to verify their credentials. Worse, 63% of these influencers fail to disclose sponsorships.

With over 3.5 million social media influencers in the country—many of them doling out financial advice—the line between information and manipulation has never been more blurred.

Financial influencers, or finfluencers, are reshaping how Indians invest. Armed with Instagram reels and YouTube shorts, they deliver digestible market insights to millions. But behind the slick videos and catchy thumbnails lies a troubling reality: only 2% of these self-styled experts are registered with the SEBI, India's capital markets regulator.

Who benefits from this trend? Social media platforms are the biggest winners, profiting from skyrocketing engagement. 

Registered financial advisors could also see a windfall as investors burned by bad advice seek professional guidance.

The losers are retail investors who mistake popularity for expertise. 

The study found that while 72% of those who followed finfluencer advice made profits, 14% of investors over 40 reported being misled or outright being defrauded.

Cost of Convenience
The CFA Institute survey has cited the ease of transaction through click-friendly apps because of slick interfaces and near-instant withdrawals as a top reason people invest in certain platforms. This convenience factor should not obscure the need for robust due diligence, particularly when many of these apps partner with unregistered or undisclosed finfluencers.

SEBI can counteract this by mandating apps to disclose partnership arrangements transparently and ensuring that any embedded advice feature is backed by registered professionals.

Another way is to ensure that advertisements and promotional materials don't masquerade as educational and informational content.

While some content is purely "guidance," much of it is promotional material framed as neutral advice. Here, the onus falls on platform hosts and SEBI to tighten disclosure rules. 

A straightforward solution is to standardise and conspicuously display disclaimers on paid or sponsored posts, requiring a clear "Sponsored Investment Content" banner on every video, reel, or blog where money has changed hands. 

This approach, along with random audits of high-visibility content creators, would keep self-styled experts from burying crucial disclaimers in fine print or lengthy captions.

SEBI Strikes
Regulators are catching up. SEBI has stepped up enforcement, issuing takedown orders, banning rogue influencers, and imposing hefty fines. The regulator is also pushing for clearer disclosures and now requires financial advertisers to register with social media platforms like Meta and Google. 

The challenge, however, is the scale of the problem. Policing millions of online voices is an uphill battle. And with finfluencers adapting their tactics, SEBI's interventions risk falling behind the next wave of investment fads.

The rise of finfluencers is not a passing trend—it's a structural shift in how retail investors consume financial information. The challenge isn't eliminating them; it's ensuring they operate with transparency and accountability. If regulators get this wrong, India's markets could face their own GameStop moment—one where retail investors learn, too late, that clicks don't equal credibility.