The Australian Securities and Investments Commission (ASIC) has issued a warning in a recent study, urging young investors to be cautious of financial influencers (finfluencers) and artificial intelligence (AI) chatbots on social media when making financial decisions. The study also revealed that a significant 23% of Generation Z individuals have ventured into cryptocurrency investments.
ASIC's "Millennial Financial Research" highlights that while younger generations have a strong demand for reliable and authentic financial information, they often struggle to find it, with their search process frequently leading them to platforms that prioritize engagement over accuracy. The research indicates that among 1,127 respondents aged 18 to 28, 63% obtain financial information and guidance through social media, 18% use AI platforms, and 30% specifically utilize YouTube.
Despite this, AI holds the highest level of trust among millennials, at 64%.
ASIC calls for vigilance regarding influencers in the cryptocurrency space.
Michael Kirkland, ASIC Executive Director, stated that they have observed numerous marketing campaigns on social media encouraging cryptocurrency investments, some even leading users into scams. He emphasized that individual investors must fully understand the associated risks, as the volatility of the cryptocurrency market far exceeds traditional investments, and its drivers are often difficult for individuals in Australia to comprehend.
Kirkland also specifically mentioned Australia's AUD 4.5 trillion superannuation system, noting that unqualified influencers are providing advice in this area. He mentioned that many individuals are attracted through social media advertisements and then persuaded to switch their superannuation plans. Given that superannuation is typically an individual's most valuable asset, irresponsible individuals often target this, and the consequences can be severe if they induce others to invest assets in high-risk ventures.
ASIC brings AI financial advice under regulatory scrutiny.
In an interview with the Australian Financial Review (AFR), Kirkland revealed that ASIC is closely monitoring the types of financial information generated by AI tools. He warned that any entity providing specific financial advice must be licensed. Under Australian law, entities providing financial advice must hold the appropriate license. If an AI tool makes recommendations about individual financial products, taking into account an individual's specific circumstances, this would be considered personal financial advice and therefore require a license.
He added, "One of the most surprising findings from this research is the high level of trust young people place in AI platforms." However, he also pointed out, "It largely depends on the nature of the questions you ask, how specific they are, and the quality of the sources of information that the AI can draw upon."