PremiumMUMBAI : To millions of Indians who took to investing under the shadow of the covid-19 pandemic, personal finance information and advice has often come via social media rather than through the formal financial services industry. Take the case of Nishchay Gogia, 36, who works as a creative head at a TV production house based in Mumbai. He first took to direct stock investing after following a set of influencers on YouTube and Instagram during the first covid-induced lockdown in the spring and summer of 2020. Considering his line of work, Gogia understandably used to mainly follow actors, comedians and other TV personalities on social media. But after stumbling on to a few personal finance videos on YouTube, including one by Rachana Ranade who is a chartered accountant turned personal finance content creator, the underlying algorithm began to recommend a slew of other financial influencers to him.
Based on the information and analysis that he could glean from these videos, Gogia started investing directly in stocks. “I used to invest in mutual funds before and I have a professional advisor who manages my MF investments. That constitutes the bulk of my savings. However, for direct stocks, I make the decisions myself," he said. “I’ve made a 40-50% return over the past year, compared to 20-25% in mutual funds. But I’m no day trader. I want to invest for the long-term," Gogia added.
As retail participation in the stock markets skyrocketed, new opportunities have inevitably opened up for influencers. Many established influencers in other fields—like self-help and comedy—have also swiftly pivoted to become self-styled money gurus. The boom has been financed largely by fintechs and cryptocurrency exchanges, which have taken to social media marketing in a big way over the past year.
For the most part, many of these financial influencers offer well-intentioned, generic advice—that even small investments can compound and grow; that anyone can become a successful investor if they select a good product and stay in it for the long haul; that the small investor should not fear the stock market. But there’s a catch: social media advice, particularly if it’s about a specific product, may not always be reliable. When delivered in a personalised manner in return for a fee, registration with the Securities and Exchange Board of India (Sebi) as an investment advisor is mandatory. The Advertising Standards Council of India (ASCI) also has a set of new guidelines for all influences. How those stipulations will impact the money influencer, who clearly has more power than someone who recommends apparel or cosmetics, remains to be seen.
For now, this revolution in seeking and giving advice about what to do with one’s money is not just confined to India. The pandemic has upended established modes of financial communication all over the world. In China, for instance, fund managers regularly conduct live streams for their followers and give out cash and alcohol freebies. In the US, a few 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’ via personalised one-on-one meetings—slowed down considerably during the pandemic. The distribution model that they represented was challenged by fintech platforms, which had begun to offer the same service for little or no cost and many of these platforms use social media influencers in a big way to get their message across.
“I have breakfast while watching YouTube (videos)," Gogia says, who does not have a cable subscription although he works in the television industry. “The really informative content is there… because the medium allows long-form content. However, Instagram gives me that first glimpse. It acts as a hook," he added.
Gogia follows financial influencers like Ankur Warikoo, Rachna Ranade and the comedian Tanmay Bhatt, who has recently started making finance videos, among others.
The money tap
Ankur Warikoo has 608,000 subscribers on YouTube. The former chief executive officer of Nearbuy.com maintained a blog for several years before dramatically increasing his footprint via social media platforms. Warikoo started posting content on LinkedIn in 2015 and then launched his YouTube channel in 2017. His initial focus was on entrepreneurship and self-improvement. About a year ago, however, Warikoo realized that there was a huge latent interest in personal finance advice. “I spoke about my own mistakes with money. That resonated far more than career or education-related posts. Now, I do around three videos a week, of which one is about personal finance," he said.
“The demand has always existed. The lockdown allowed people who had the knowledge to take the time out to create content around it," he said. Among the platforms, however, Warikoo feels that there is a hierarchy. “I treat Instagram at the bottom of the chain for serious content creation. How much value can you deliver in 15-30 seconds?" he asked.
“Anyone with more than 100,000 followers can make ₹50,000- ₹1 lakh per video on YouTube from sponsors. For Instagram, I would put the revenue at half that for the same no of followers," he added. The money flowing into the space has also expanded rapidly. For Sharan Hegde, 25, a management consultant with PwC in Bengaluru who has 105,000 followers on Instagram, the amount he earns from paid social media promotions on ‘financewithsharan’ exceeds his monthly salary.
Influencers typically get paid in three ways. First, they create “promoted videos" for brands. For instance, Anushka Rathod, a PF influencer often promotes Indwealth, a wealth management fintech firm. Second, they make money via online workshops that are ticketed. Third, they can funnel individuals into their own financial services businesses. Anant Ladha, an MF distributor, is an influencer in his own right. His YouTube channel—Invest Aaj for Kal—has 471,000 subscribers.
The mechanics
Sayali Rai and Niyati Thaker of Fincocktail, an Instagram handle with 127,000 followers, don’t fit the image of traditional financial advisors—they do not wear suits, use whiteboards, or speak in jargon. Instead, they often play some background music and dance while displaying bullet points on topics like ‘Things to keep in mind while buying a house’.
Rai is a former investment banker with Citi, while Thaker has spent five years as a wealth manager in ASK Wealth Management. “A lot of people in our friend circle were independent professional women who made a lot of money, but they didn’t know how to invest it," Rai explained. “That’s why we started Fincocktail in August 2020… 15 August to be exact, to celebrate financial freedom. Initially, our viewership grew only gradually, until one of our videos went viral." “It was on the 15-15-15 rule—if you invest ₹15,000 per month for 15 years and it compounds at 15%, you will accumulate ₹1 crore. A lot of people don’t believe this rule, but it’s true!" she added. Around the same time, Sharan Hegde also started recording videos on personal finance. Hegde initially focused on YouTube but realized that competition was stiff in the long-form video space and growth was muted. He then began using Instagram to promote his YouTube videos, only to see followers surge on his Instagram handle. “YouTube is only for those who actively search for finance. The Instagram algorithm suggests viral content regardless of active searching," he said. Hegde, who is assisted by his sister Shreya, experiments with different content delivery styles, such as the one-person skit format popularised by comedian Danish Sait. Several social media influencers who put out personal finance content in regional languages have also amassed a huge following in recent months. For instance, Sharique Samsudheen, who has 745,000 subscribers on YouTube, speaks in Malayalam.
The regulatory void
Even as money has begun to pour in, the influencer phenomenon is dogged by regulatory question marks. Many influencers are neither licensed as financial advisors nor as research analysts by Sebi. In order to remain compliant in the absence of such a license, some influencers stay away from paid personalised advice. But this leads their users to a dead-end in case they have queries or doubts, which remain unanswered.
“I get around 50 direct messages a day and I only manage to answer 5-10," said Hegde. Rai and Thaker schedule two days a week for “consultations", where they deliver more detailed investment guidance to individuals who ask for it. This is a regulatory grey zone—personal investment advice in return for money can only be delivered by investment advisors who are registered with Sebi. Rai and Thaker say that they have a NiSM (National Institute of Securities Markets) certification for mutual funds, and this authorizes them to deliver these consultations when it comes to mutual funds. “We provide guidance on saving habits, investing myths and financial literacy," said Thaker. She added that most of the queries they receive are simple such as what is the difference between mutual funds and systematic investment plans (SIPs), or what is an index fund, and so on. “We get into details only when asked and that too only about mutual funds, not any other investment product," said Thaker.
Accepting money for promoting a particular product or app is one thing, but some influencers also have arrangements through which they get paid on meeting a certain target-related metric, such as the number of accounts that were opened or the value of trades that were executed based on a particular recommendation, said a senior executive at an equity research firm on condition of anonymity. These arrangements 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 bring some clarity in this space but to what extent they will be enforced is uncertain. For money influencers especially, the absence of Sebi guidelines is a big vacuum.
“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 person in his 30s should invest ‘x’ amount in equities," said Mrin Agarwal, founder, Finsafe India Pvt. Ltd and co-founder of Womantra. “Second, there is a huge focus on returns and very little on risk…just to increase their follower count. Products like cryptocurrency are sometimes compared to fixed deposits. All 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 putting in the hard research work," said Rahul Goel, CEO, Equitymaster, a Sebi-registered research analyst firm. “For regulated intermediaries, on the other hand, to give out such recommendations, a robust research process has to be put in place and numerous regulations have to be complied with," he added.
Influencers no doubt inform and entertain, a great combination for India’s lay investors as well as its under-penetrated equity markets. However, whether they should play a major role in serious investment advice and in what form is still an unresolved question.
