Finfluencers, financial literacy and the future of advice

Welcome to Money Markets and Masterminds, a CityWire South Africa podcast that delves into the intricate world of finance, investment and strategic decision making. If you're a fund selector, an independent financial advisor or an institutional capitalist looking for insights, analysis and expert opinions to enhance your perspective, you're in the right place here with me, Editor Ruan Uyester. Today, we're discussing a topic that is rapidly changing how people learn about money and investing.

For decades, consumers relied on financial advisors, banks, insurers, and traditional media for financial information. Now, many South Africans are turning to TikTok, Instagram, YouTube, podcasts, and even social media for guidance. The Financial Sector Conduct Authority is now conducting a market study into Finfluences and their impact on consumer decision-making. At the same time, the regulator is warning about online scams, misinformation and the increasingly blurred line between financial education and financial advice.

So who is shaping investor behavior today and how should advisors respond? To help us unpack these questions on this month's Regulatory Rulebook episode, I'm joined by Coco Cabello, Senior Manager in Market Research and Economic Analysis at the FECA. Coco's career includes diverse roles within the FECA, spanning from the supervision of micro-insurance and strategic stakeholder management to prior and local international affairs. Prior to joining the FECA, Coco contributed to financial sector policy development at the National Treasury.

Coco, welcome to the show. Thank you very much, Joanne. It is a pleasure talking to you today. Let's start with the big picture.

How financially literate are South Africans today? Okay, so back in 2020, the FSCA found that only about 51% of South Africans were financially literate. And the FSCA is currently conducting an updated financial literacy baseline study, which should give us a clearer and up-to-date picture of how South Africans are doing today. Coco, the FECA spends significant resources on consumer education.

Where are you seeing the biggest gaps in financial understanding? Well, from our consumer education work, we've noticed three big gaps. Firstly, long-term planning is tough for many consumers. Immediate needs often take priority and the retirement and future security issues don't really get the attention that they deserve.

Right. And secondly, choosing the right investments is tricky. We're seeing that many consumers don't fully understand how to merge investment products with their goals and risk appetite, leading to poor choices or unrealistic expectations. And the third thing, Rowan, is around the fine print in financial products, which often goes unnoticed and that can cause unpleasant surprises when it's time to claim.

Koko, in your experience, what are the most common mistakes that South Africans continue to make when it comes to saving, investing and retirement planning? Well, a few money habits keep showing up. And these are common money habits, right? Firstly, many people don't save regularly, or they put it off until this extra money.

And the problem is that that delays a lot of things for many people. That delay means missing out on compound growth and being unprepared for emergencies or even retirement. And also chasing high returns without understanding the risks is a big issue. Too often, Ruan, people jump at promises of quick gains, which leaves them exposed to losses and scams.

Also, dipping into retirement savings when changing jobs is a big issue. and people don't realize that it actually chips away at long-term security, often setting people back for many years. And also scams and unregulated schemes remain a serious threat. Frustras, they are getting more sophisticated and even financially savvy consumers.

we're seeing that they are getting caught off guard. And all this, Rowan, shows that better financial outcomes aren't just about having access or information. It's really about the behavior. So yeah, those are the big common mistakes that we are seeing today.

Coco, many advisors tell us here at CityWire that behavior is a bigger challenge than knowledge. Do you agree with that notion? Absolutely. The area is often the bigger hurdle.

Many people already know the basics of what they should be doing with their money. But acting on that knowledge consistently is another story. You know, biases like overconfidence and also the pull of short-term gratification can easily override good intentions. So it's not that consumers don't know about savings and planning.

The issue is that habits, emotions, and impulses often get in the way of sticking to the plan. Coco, the FECA recently commissioned a market study into Finfluences. What prompted that research? Sure.

So the market study was prompted by the realization that social media has quickly become a major source of financial information. And in that the influence of Finfluencer has gained prominence So their reach and their impact on consumer decision it's not something that the FSCA can ignore. And because of this, it made sense to conduct a market study to explore how Finfluencers shape consumers' decision-making and financial behaviour. Do you think Finfluences primarily help to improve financial literacy or are they creating new consumer risks?

So, Rowan, with this global reach, right, social media isn't just about entertainment anymore. It's reshaping how people manage and learn about money. And social platforms have become strong drivers of consumer preferences and financial behavior. And in that enters deaf influencers who are playing an increasing role in spiking interest in everything from budgeting to savings to investments, you name it.

Right. So they talk about different finance topics. and this on its own with the use of and the spread of social media and the prominence of social media, it does come with some level of risk. Tell me, one of the themes that emerged from your discussion at the FECA conference was the role of trust and familiarity.

How powerful are those factors when consumers make financial decisions online? hmm well often consumers take social media and influencer content at face value yet there's little oversight to ensure the information is accurate and unbiased right and influencer follower relationship can make consumers much more vulnerable especially because a lot of the time this type of relationship is one-sided. This is where followers feel emotionally attached to famous or media figures such as celebrities, creating a sense of attachment and trust which boosts the perceived credibility of influencers.

us. Moreover, a large following, high engagement that we see on social media or professionally produced content even, can create a strong sense of trust, even when the information being shared is unverified, it's incomplete or even biased. And Ruan, this risk is especially pronounced for people with low financial literacy who are more likely to take information at face value, as I have mentioned before, and in turn face very great or high exposure to harm. Let's talk about that line between financial education and financial advice.

Why is that distinction so important? It is important because let me explain it this way. Financial education is generally aimed at broad general concepts that are aimed at your broad audience, right? And focus on empowering people with the basic tools and confidence to engage with financial products and make financial choices and decisions.

While financial advice, on the other hand, it's personal. So licensed advisors, they would tailor recommendations to someone's unique circumstances, goals, and risk tolerance and life stages. They also bound by law, the financial advisors, they are bound by law to act in their client's best interests and to disclose risks and related costs, right, and to flag any potential conflict of interest. Now, this distinction matters because when advice is given without proper authorization or without understanding someone's situation, it can lead to poor or even harmful outcomes.

So a clear distinction helps ensure that consumers receive the right support at the right level. So essentially, education builds confidence, it builds knowledge, but it doesn't push a product. So at what point does online content move from general education into regulated financial advice? And is it a disclaimer saying this is not financial advice enough to protect a content creator?

Yeah, interesting. So content crosses the line from general financial education into regulated financial advice when it stops being broad, as I've mentioned earlier about financial education. So when it stops being broad and starts steering consumers towards specific actions and specific products, right? Because at that point, regulatory scrutiny applies because the guidance could materially affect someone's financial outcomes.

Therefore, once content starts influencing decisions about a specific product, it moves into the sphere of regulated advice where safeguards and compliance requirements are necessary to protect consumers. Now about disclaimers, content creators often use disclaimers as a way to shield themselves from liability, essentially saying this isn't advice, just information. But the reality, Rowan, is that disclaimers don't undo the harm of misleading content and misconduct, right? A disclaimer isn't enough to counteract the influence of the message itself.

If the content pushes risky products, if the content encourages poor decisions, or even hides conflict of interest, the disclaimer becomes little more than just a formality. And maybe to just end my response to this by saying that no amount of disclaimers will avoid administrative sanctions criminal prosecution or even civil action in the appropriate circumstances Coco, we've spoken about consumers behaving badly, but what are some of the most common mistakes that the financial content creators make themselves?

Yeah, so common mistakes by content creators often relate to the oversimplification of complex financial concepts and decisions. They may also overpromise returns while downplaying risk. They may also be avoiding balanced messaging, cherry-picking success stories that don't reflect typical outcomes. And another big issue is lack of proper disclosures, including when conflicts of interest are not made clear.

For an example, instead of being upfront about partnerships or sponsorships that content creators have with product providers, some of them would choose to hide those ties. And by hiding commercial relationships with product providers, they make it hard for you and I as consumers to know whether advice is genuine or influenced by hidden deals. Let's talk about trust scams and digital fraud, and we've likely touched on that already. The FECA has described digital fraud as one of the most serious conduct risks of our time.

How significant has this problem become? Very. According to various data sources, including data from SEBRIQ and the South African Fraud Prevention Service, There's a growing complexity of scams, which increasingly exploit digital platforms, personal data breaches, and cyber vulnerabilities. So digital fraud is a serious conduct risk because it has become more targeted and most people are losing money to scams.

And I just also want to say that the digital fraud incidences, as indicated by the sources that I was mentioning earlier, they are mainly driven by social engineering techniques such as phishing, bashing, and other social engineering techniques, right, where criminals obtain passwords, pins, and or even approvals by tricking victims through sophisticated complicated fraud scheme. Koko, how can consumers distinguish between genuine financial education and content designed primarily to sell something or defraud themselves?

Yeah. I think consumers need to pause, right? and ask questions about the information that is being given. And that's what we are seeing as one of the big issues, is that there's this issue around people wanting to make decisions, financial decisions very quickly, which leads them into making wrong decisions eventually because they're going to pause to ask, is this information offered by the qualified person, the qualified financial provider?

You know, is the person that is sharing the information registered with the FSCA? You know, is the content actually disclosing all the balance message in terms of the risks and the benefits? So, and most of the time, as I've mentioned earlier, With education, it's more broad. It's empowering.

While the selling pushes you towards something, it creates a sense of urgency. It creates a sense of do it now or else you will miss out. So consumers should also be on the lookout for such tactics. Let's talk about what this all means for advisors.

Many advisors have told us they feel they are competing against social media personalities who do not operate under the same compliance framework. Is that a fair concern? So, here's the thing, right? traditional financial advisors are required to understand the whole picture before recommending anything while social media personalities by contrast they often skip the step leaving followers very vulnerable to unsuitable financial choices so i would say that social media personalities have become powerful voices in finance especially for younger tech savvy retail investors.

Unlike traditional advisors, they spark curiosity and sustain engagement across a wide range of financial topics. But this influence comes with a risk. So that just needs to be out there. Tell me, can advisors and influencers coexist or are they just competing for the same audience?

Influencers and traditional financial advisors can coexist because they don't serve audiences in exactly the same way. The coexistence can work because influencers fuel interest and awareness, while advisors translate that interest into responsible, personalized action. The reality Ruan is that consumers are no longer relying on a single source of information They are blending professional advice with social media content Hence I saying that they can coexist Do you think advisors need to become more visible on digital and social media platforms?

Let me put it this way. If financial advisors want to connect with younger audiences who are already turning to social media for guidance, they should consider it. But the real question isn't whether advisors need a digital presence. For me, that is given.

The focus has shifted to how they should show up online, engaging in ways that build understanding while still honoring the professionalism and the regulatory standards and requirements. Kokosu, what role should advisors then play in improving financial literacy? Yeah. Financial advisors play an important role in translating general and broad educational financial content into personalized advice that can help consumers navigate complex financial choices responsibly.

responsibly. So their role is not just to inform, right? So the advisor's role is not just to inform, but to guide consumers through financial decisions that could have long-term financial consequences. The FSA expects to publish its Influencer Study during the 2026-27 financial year.

What questions are you hoping the research will answer? Well, we expect the research to tackle key questions about how influencers shape consumer financial decision making processes and to clarify the FSC's role in this evolving influencer ecosystem. All this is done to protect financial consumers and enhance consumer outcomes. And also maybe to add, Ruan, that it also assists the FSCA in its decision-making around possible legislative changes and how to deploy enforcement resources where it needs to be.

Could you eventually see more formal guidance around Finfluences and financial content creation? So regulators around the globe are starting to pay closer attention to Finfluencers and content creators, including issuing guidance to Finfluencers to boost transparency and protect financial customers. And that said, Rowan, the outcome of the current study will determine whether the FFCA should consider formal guidance in this space or not. But we'll have to wait for the outcome of that study.

Let's look into the future. What would success look like for consumer financial education in South Africa five years from now? Success in consumer financial education over the next five years would be reflected in various ways. It would be reflected in improvements in digital financial literacy, in the ability to detect fraudulent activity and scam and also in improved consumer financial wellness.

And just to add that it would also reflect greater confidence in engaging with financial products and a better understanding of how to align those products with people's personal goals. Gogo, as a final question, I'm going to put you on the spot. If you could give every South African consumer one piece of advice before they act on financial content they see online, what would that be? Can I give you more than one piece of advice?

Yes, absolutely. Yeah, so I would encourage South African consumers to pause before you act. verify online financial content with a licensed financial institution or financial advisor before you act on it and on also to mention that with all these scams that are rive and are so sophisticated people need to bear in mind that not all information on social media is credible Just because content has thousands or even millions of likes or has been reshared many times, it doesn't mean that it is legitimate or credible.

So popular and familiarity does not equal accurate. So let us avoid making financial decisions based on high pressure sales techniques, a sense of urgency and even the fear of missing out. So let's pause, ask before we act. Well, that's all the time we have today.

And thank you, Coco, for being a fabulous guest and making us understand how the two worlds between financial advice and finfluencing collides. We look forward to next month's episode of the Regulatory Rulebook with another expert at the FECA. To all our CityWire South African listeners, thank you for tuning into this episode of Money Markets and Masterminds with me, Editor Juan Uester, and my producer, Vera Loba de Silva from the CityWire Studios team. If you enjoyed this episode, please don't forget to subscribe, leave a review and share it with your network.

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And with that, and until next time, goodbye.