Should You Trust Financial Influencers After The Vauld Fiasco?

Just like many other platforms, Vauld has been facing financial challenges as the global cryptocurrency market finds itself in the middle of excessive volatility. Vauld has now been looking at a potential restructuring.

It was only in October 2021 that Vauld caught a lot of people’s attention. Its slick advertisement, “For Everything Crypto Just Vauld”, caught on. It also came up with a super attractive fixed deposit with an interest rate of 12.68 per cent, an enticing offer indeed.

The popularity rose and perhaps part of the reason was their move to rope in popular financial influencers, also known as finfluencers, to talk up the crypto “Fixed Deposits”. The four popular finfluencers who have promoted Vauld in the past are P.R. Sundar, Ankur Warikoo, Akshat Srivastav and Booming Bulls.

While the strategy may have paid off the company initially, questions are now being raised on the “influence” that finfluencers wielded on genuine and gullible investors, who may have jumped into investments without fully understanding the risks they entailed. Twitter was abuzz with angry reactions.

Influencers espouse a particular cause or idea and have a large number of following on social media. Companies, typically, sign them up to promote brands among the influencers’ large following. These contracts could either be monetary or non-monetary in nature.

According to guidelines in several countries, it is mandatory for influencers to make necessary disclosures for influencer marketing purposes. In May 2021, the Advertising Standards Council of India (ASCI) launched influencer marketing guidelines. The guidelines say that influencers need to be transparent in their disclosures when they are promoting a brand for commercial gain. Several influencers have already started complying with these guidelines but there are several others who don’t.

The guidelines clearly mention that an influencer must disclose any partnership with a brand. These disclosures should not just be limited to monetary agreement, but even to non-monetary ones, say the guidelines. Also, such disclosures need to be made clearly. They should be easily visible, and should be easy for the reader to read and comprehend.

Finfluencers are not mandated by regulations to give financial advice but do it of their own volition. Therefore, trusting them blindly may not always be advisable.

“Securities and Exchange Board of India-registered investment advisors (Sebi RIAs) have a fiduciary duty towards their clients to give financial advice in the best interests of their clients. They work in a regulated environment and they are always under the scanner of Sebi. Hence, I feel some random person without proper qualifications should not be talking about financial investment topics. This could impact common people and investors. It’s about accountability and ethics. It’s important for the regulator to regulate finfluencers. People would also have to understand that finfluencers are advising without any investor return or concern in mind. This is simply unethical,” says Kalpesh Ashar, certified financial planner and a Sebi-registered investment advisor.

There are a number of bloggers, writers and YouTubers, who write and advise about various kinds of investments. The content is sometimes useful but sometimes misleading, yet it gets amplified because of the wide reach of social media.

“Financial illiteracy is rampant in our society. This online content is being consumed as a source of that ‘financial education’. The problem is that not all this information and interpretation is accurate and usable. The unaware reader sometimes takes that as a replacement for fiduciary expert advice. The effect of social media amplifies the information and unfortunately is mistaken as gospel truth,” says Renu Maheshwari, chief executive officer and principal advisor, Finzscholarz Wealth Manager and a Sebi-registered investment advisor.

It is important to check the credentials of the influencers. “You must do your own due diligence on the influencer: what does he/she do for a living? What is their qualification? What is their authority on the subject matter? Where are they operating from? Do they have a vested interest in writing what they are penning down? While a number of followers may represent their popularity, it does not represent credibility. We always recommend taking fiduciary paid advice who will give recommendations based on hard facts and for your well-being and not get carried away by the glamorous products or content,” says Maheshwari.

Ideally, you should stay away from clickbait content. When an influencer or finfluencer is using words or phrases like “guaranteed return”, or “double your money”, and so on, without giving any disclaimer on the risk involved here, you should be suspicious. The same goes for “get-rich” schemes or tips to make money quickly.

It is advisable to consult a registered financial advisor before making any investment decision. If you don’t want to do that and depend on your own research, go to genuine sources of information instead of blindly following what finfluencers are saying.