Based on the information and analysis he was able to glean from these videos, Gogia began investing directly in stocks. “I used to invest in mutual funds and have a professional advisor who manages my MF investments. That makes up the bulk of my savings. For direct stocks, though, I make the decisions myself,” she said. “I’ve gotten a 40-50% return over the past year, compared to 20-25% in mutual funds. But I am not a day trader. I want to invest for the long term,” added Gogia.
As retail participation in stock markets soared, new opportunities for influencers inevitably opened up. Many established influencers in other fields, such as self-help and comedy, have also quickly become money gurus. The boom has been funded in large part by fintechs and cryptocurrency exchanges, which have been heavily involved in social media marketing over the past year.
For the most part, many of these financial influencers offer well-intentioned, generic advice: that even small investments can accumulate and grow; that anyone can become a successful investor if they select a good product and stick with it for the long term; that the small investor should not fear the stock market. But there’s a problem: advice from social networks, especially if it’s about a specific product, may not always be reliable. When delivered on a personalized basis for a fee, registration with the Securities and Exchange Board of India (Sebi) as an investment adviser is mandatory. The Advertising Standards Council of India (ASCI) also has a new set of guidelines for all influencers. It remains to be seen how those stipulations will affect the money influencer, who clearly has more power than someone who recommends clothing or cosmetics.
For now, this revolution in seeking out and giving advice on what to do with one’s money is not limited to India. The pandemic has upended established modes of financial communication around the world. In China, for example, fund managers regularly host live streams for their supporters and hand out gifts of cash and alcohol. In the US, some Reddit groups have been instrumental in driving the price of certain stocks up or down.
In India, the dominant model of financial information and guidance, which is delivered by an army of bank “relationship managers” through personalized one-on-one meetings, has slowed considerably during the pandemic. The distribution model they represented was challenged by fintech platforms, which had started to offer the same service at little or no cost, and many of these platforms heavily use social media influencers to get their message across.
“I eat breakfast while I watch YouTube (videos),” says Gogia, who does not have a cable subscription although he works in the television industry. “The really informative content is there…because the medium allows for long-form content. However, Instagram gives me that first glimpse. It acts like a hook,” she added.
Gogia follows financial influencers like Ankur Warikoo, Rachna Ranade, and comedian Tanmay Bhatt, who recently started making finance videos, among others.
The money faucet
Ankur Warikoo has 608,000 subscribers on YouTube. The former CEO of Nearbuy.com maintained a blog for several years before dramatically increasing his presence across social media platforms. Warikoo began posting content on LinkedIn in 2015 and later launched his own YouTube channel in 2017. His initial focus was entrepreneurship and self-improvement. However, about a year ago, Warikoo realized that there was a lot of interest in personal finance advice. “I talked about my own mistakes with money. That resonated much more than posts related to career or education. Now, I make about three videos a week, one of which is about personal finance,” he said.
“The demand has always been there. The lockdown allowed people who had the knowledge to take the time to create content around it,” he said. Between the platforms, however, Warikoo feels there is a hierarchy. “I treat Instagram at the bottom of the chain for content. I laughed. creation. How much value can you deliver in 15-30 seconds?” she asked.
“Anyone with more than 100,000 followers can do $50,000- $1 lakh per YouTube video from sponsors. For Instagram, I would put the revenue in half for the same number of followers,” she added. The money flowing into space has also expanded rapidly. For Sharan Hegde, 25, a management consultant at PwC in Bangalore who has 105,000 followers. On Instagram, the amount she earns from paid social media promotions on ‘financewithsharan’ exceeds her monthly salary.
Influencers are generally paid in one of three ways. First of all, they create “promoted videos” for brands. For example, Anushka Rathod, a PF influencer, often promotes Indwealth, a wealth management fintech company. Second, they make money through ticketed online workshops. Third, they can funnel people into their own financial services companies. Anant Ladha, an MF dealer, is an influencer in his own right. His YouTube channel Invest Aaj for Kal has 471,000 subscribers.
Sayali Rai and Niyati Thaker of Fincocktail, an Instagram handle with 127,000 followers, don’t fit the image of traditional financial advisors: they don’t wear suits, use whiteboards, and speak in jargon. Instead, they often play background music and dance while showing vignettes on topics like “Things to Consider When Buying a Home.”
Rai is a former Citi investment banker, while Thaker has spent five years as a wealth manager at ASK Wealth Management. “Many people in our circle of friends were independent professional women who made a lot of money, but didn’t know how to invest it,” Rai explained. “That is why we started Fincocktail in August 2020… August 15 to be exact. , to celebrate financial freedom. Initially, our audience grew gradually, until one of our videos went viral.” “I was on the 15-15-15 rule, if you invest $15,000 per month for 15 years and is compounded at 15%, will accumulate $1 million rupees A lot of people don’t believe in this rule, but it’s true!” he added. Around the same time, Sharan Hegde also started shooting personal finance videos. Hegde initially focused on YouTube, but realized that competition was stiff in the long form The video space and growth was muted Then he started using Instagram to promote his YouTube videos, only to see an increase in followers on his Instagram account “YouTube is only for those who actively seek financing. Instagram’s algorithm suggests viral content regardless of active search,” he said. Hegde, who is assisted by his sister Shreya, experiments with different styles of content delivery, such as the one-person parody format popularized by comedian Danish Sait Several social media influencers who post personal finance content in regional languages have also amassed a large following in recent months, for example Sharique Samsudheen, who has 745,000 YouTube subscribers, speaks Malayalam.
The normative gap
Even as the money has started rolling in, the influencer phenomenon is riddled with regulatory question marks. Many influencers are not licensed as Sebi financial advisors or research analysts. To remain compliant in the absence of such a license, some influencers steer clear of paid personalized advice. But this leads its users to a dead end in case they have queries or doubts, which go unanswered.
“I get about 50 direct messages a day and can only respond to 5-10,” Hegde said. Rai and Thaker schedule two days a week for “consultations,” where they provide more detailed investment guidance to people who request it. This is a regulatory gray area: personal investment advice for money can only be provided by investment advisors registered with Sebi. Rai and Thaker say they have a NiSM (National Institute of Securities Markets) certification for mutual funds, and this authorizes them to provide these inquiries when it comes to mutual funds. “We provide guidance on savings habits, investment myths and financial education,” said Thaker. He added that most of the queries they receive are simple, like what is the difference between mutual funds and systematic investment plans (SIPs), or what is an index fund, etc. “We go into detail only when asked and that too only about mutual funds, not about any other investment product,” Thaker said.
Accepting money for promoting a particular product or app is one thing, but some influencers also have arrangements whereby they get paid for meeting a certain goal-related metric, such as number of accounts opened or value of the operations carried out. based on a particular recommendation, a senior executive at a stock research firm said on condition of anonymity. These agreements are not always disclosed to the public. A new set of guidelines issued by the Advertising Standards Council of India (ASCI) in June is expected to shed some clarity in this space, but the extent to which they will be enforced is unknown. Especially for money influencers, the absence of the Sebi guidelines is a huge gap.
“First of all, a lot of these influencers dole out generic asset allocation advice. Asset allocation should always be tailored to the specific circumstances of each individual; you can’t just say that a 30-year-old should invest ‘x’ amount in stocks,” said Mrin Agarwal, founder of Finsafe India Pvt. Ltd and co-founder of Womantra. “Secondly, there is a huge focus on the returns and very little in the risk… just to increase the number of followers. Products like cryptocurrencies are sometimes compared to fixed deposits. All of this can be very detrimental to investors,” she added.
“There is also no way to verify whether influencers give stock recommendations or IPO recommendations after doing a lot of research,” said Rahul Goel, CEO of Equitymaster, a Sebi-registered research analyst firm. “For regulated intermediaries, on the other hand. In order to give such recommendations, a robust vetting process must be put in place and numerous regulations must be complied with,” he added.
Influencers certainly inform and entertain, a great combination for India’s lay investors as well as its under-penetrated stock markets. However, whether and in what form they should play a significant role in serious investment advice is still an open question.