‘Finfluencers’ – Who are they and what risks do they pose?

Who are ‘Finfluencers’?

Finance + Influencer = Finfluencers

This is the general equation of what a ‘Finfluencer’ is but ASIC and the ATO have other ideas about who should be considered a trusted financial advisor.

Why do they pose a risk to potential investors?

In the world of social media, influencers and content creators with many followers provide financial advice to a wide audience at scale. Many finfluencers provide unlicensed financial advice to an audience of all ages through different channels such as Instagram, Reddit and Tiktok. Some of the advice do not offer or provide adequate protections to consumers that otherwise would be available through consumer affairs and other avenues if receiving licensed financial advice.

A person providing advice about financial products such as shares, bonds, superannuation, interests in managed investment schemes or insurance must hold an Australian Financial Services Licence. What constitutes financial advice depends on whether a finfluencer is making a recommendation, statement of opinion, or intends to influence an individual in making a decision in relation to a particular financial product.

An exemption to holding a license, is if the influencer has provided general advice through video, recording or other means, but only where the sole or principal purpose of the transmission or recording is not the provision of financial product advice.

There is a risk of investors relying on the advice of a finfluencer who may offer advice surrounding Cryptocurrency or NFT’s as they may have their own vested interest in these investments that they recommend.

This advice can tap into the emotions of investors to create a fear of missing out. Investments such as NFT’s are currently being pushed substantially by finfluencers to exhibit hype or excitement, that would not have otherwise provided the investor with protection with their funds in the event of data breaches. Investors should be skeptical and exercise due diligence before purchasing any of these type of investments, or relying on the advice of unlicensed finfluencers.

ASIC has stated that ‘financial advice must only be provided by qualified and licensed financial advisers or financial counsellors, not by individuals or corporations who neither hold an AFS license nor are authorised representatives of an AFS licensee”.

If a finfluencer is deemed to be running a financial services business whilst unlicensed, they may be in breach of the Corporations Act 2001 (the Act), which may result in substantial penalties. This also applies to corporations.

There are significant penalties for providing financial advice without a licence:

  • for a criminal offense, individuals face up to five years’ imprisonment and/or a fine of up to $133,200; and
  • the civil penalties include a fine for individuals of up to $1.11 million, or three times the benefit obtained/detriment avoided.
What to look out for?
  • Schemes which involve market manipulation, where the finfluencer promotes certain investments generating excitement about upward market trends to “pump” the price upwards, then subsequently selling the stock at its overvalued price “dumping” to crash the price again.
  • Check to see if the finfluencer holds the investment they are promoting through their videos or blogs as their advice may be self interested.
  • If they approach you to collaborate, exercise your due diligence and perform checks before engaging with them.
  • Review any regulatory risks that may be present if you are an investor being approached by a finfluencer to conduct business as a financial services business.
  • If they state that they have made substantial gains over a time period, investigate and research the investment’s trend as they may not be disclosing the full picture.
  • Check to see if they are marketing themselves as financial experts, as many find loopholes to avoid breaching the Corporations Act with disclaimers stating that it is merely general advice.

MDC does not hold an AFSL License and will not provide financial investment advice. MDC will refer clients to our appropriate business partners who hold an AFS license to provide tailored financial advice for your needs.

Working from home and flexible workplaces

Working from home

Working from home has provided many benefits for many employees around Australia, and also around the world. Hundreds of hours of reduced travel time to work and costs associated with commuting including parking, myki or opal card and buying lunch, allowed workers to keep more of their pay in their pockets. Most would overlook these as part of an everyday routine, and would notice a considerable decline in their savings balances at the end of a pay cycle after having to pay for these expenses.

A considerable amount of businesses and their employees have had to make a drastic adjustment in the way they operate due to COVID-19, but has in fact accelerated what would have occurred in the next decade. Small and large businesses had to quickly pivot their operations to ensure employees were able to fulfill their duties at home, the same way as they would at the office. As time went on, the fatigue from COVID-19 largely caused a divide in the way people would prefer to operate, as the novelty of working from home started to diminish over time throughout the pandemic.

Waking up without having to worry about what outfit to pick for your day made the day more comfortable, at the expense of possible productivity. We know there are many distractions when it comes to working from home, such as the dog barking, babies crying or tracking your eBay parcel. In saying this, there are those that are very satisfied with working from home, as it caters to their personal situations such as being a carer or looking after a newborn.

PwC Australia future of work lead Ben Hamer said the firm’s research into the shift to remote work found three-quarters of Australians want a hybrid of home and office working post-pandemic. Only one in 10 wanted to return to working five days a week in an office environment. A hybrid environment allows for the flexibility of having days where you can work from the comfort of your home, whilst still being able to connect with your colleagues once you are back in the office. A hybrid arrangement is very attractive for new talent and should result in overall increased employee satisfaction.

Issues with working from home

There are others which were not so lucky, such as the businesses with leases they must pay for an empty office or shop. Employees who were stood down or made redundant/terminated due to closures were also substantially impacted. There are also concerns surrounding reduced physical activity and possible loneliness due to isolation which can lead to other mental health issues. Mental health is a major issue which needs to be more widely addressed as many suffered some form of mental health issue during the height of the COVID-19 pandemic. The anxiety around the virus, as well as increased workloads caused burnout for many where assistance was required to cope. People affected by mental health should seek assistance as soon as possible, and not let their negative feelings bottle up.

For many there was no physical separation between home and work-life as they both seem to have been blended together with days seeming almost connected. It is therefore important to be able to ensure employers and their staff separate the days by allocating sufficient time for lunch, families and exercise after work.

Communication issues such as internet connection failure or the ease of misreading cues via electronic communication may result in communication breakdown amongst peers.

As you save money on reduced transport and commutation costs, the average worker is spending more money on groceries per month whilst working from home.

For employers, the ability of oversight is severely reduced as the physical separation between the employees and employers may result in a reduction in accountability and output.

As employees get used to saving more, will they want to spend this when things start to open back up?

Cafes and restaurants are yearning for people to spend as they used to, to recoup lost revenue. Do you pay $5 for a coffee in Flinders Lane or make one using your coffee machine from home before you leave work? These are questions many Australians think about now as saving is on the forefront of many peoples minds other than the pandemic.

The Great Resignation

The Great Resignation a term being thrown around is now of greater concern for businesses as they struggle with retaining staff and being able to pay the additional salary increases due to increased workloads within certain industries. In the Accounting industry, many employees who were previously laid off are now being rehired with pay increases after being subsequently reinstated as a skills shortages became commonplace.

Through the use of Zoom and Microsoft Teams in this current environment, MDC ensures that all of our client’s needs are continuing to be met wherever they are based. This added flexibility allows our customers to receive the accounting services they require through a zero contact method, which safeguards the well-being of our clients and staff.

Superannuation changes recap – 2021

Superannuation contribution caps and thresholds indexed

The superannuation contribution caps thresholds have increased due to indexation.

Effective 1 July 2021, these thresholds are as follows:

  • The concessional contributions (pre-tax) cap increase to $27,500
  • The Non Concessional Contributions (after tax) cap increase to $110,000, or $220,000 and $330,000 under the two and three year bring forward rule, respectively
  • The general transfer balance cap increase from $1,600,000 to $1,700,000

COVID-19 relief measures for SMSFs extended

SMSFs impacted by COVID-19 due to the extended lockdowns in certain states and territories will be granted extended relief to cover the 2021/22 financial year.

During COVID, a SMSF trustee may have provided or accepted certain types of relief, such as giving a tenant/s (including a related party tenant) a reduction in rent if they were financially impacted due to COVID-19. As charging a price that is less than market value will usually give rise to contraventions under the superannuation laws, the relief measures will avoid this outcome if the arrangement meets certain criteria (ie, the relief is offered on commercial terms and the arrangement is documented, etc).

Bring forward rule extended to 67

From 1 July 2020, individuals can trigger a bring-forward period if they are under age 67 (previously age 65) at the start of the financial year.

This means the work test (or work test exemption) only needs to be satisfied if the contribution is made after the individual turns 67.

If the individual can satisfy the work test (or the work test exemption), they will have the entire financial year to make any bring-forward non-concessional contributions (NCC) to superannuation.

Minimum annual pension drawdowns halved

The 50% reduction in pension minimums have been extended to 2021/22 due to COVID-19.

This reduction applies to minimum annual pension payments required from account-based pensions, transition to retirement income streams and market-linked pensions (term-allocated pensions).

Removal of the excess Concessional contributions charge

Individuals who make Concessional contributions (pre-tax) on or after 1 July 2021 that exceed their Concessional contributions cap will no longer be liable to pay the excess Concessional contributions charge. However, individuals who had exceeded their Concessional contributions cap in the 2020/21 financial year and earlier years (back to and including 2013/14) may still be subject to an excess Concessional contributions charge.

This means from 1 July 2021 onwards, individuals who exceed the Concessional contributions cap will still be issued with a determination and taxed at their marginal tax rate on any excess CC amounts, with a 15% tax offset to account for the contributions tax already paid by their superannuation fund, however no excess Concessional contributions charge will be imposed.

Recontribution of COVID-19 early release amounts

Individuals can now re-contribute amounts they withdrew under the ‘COVID-19 early release of superannuation program’ in 2019/20 and/or 2020/21 without them counting towards their Non-Concessional contributions cap. The re-contribution must be made on or after 1 July 2021, and on or before 30 June 2030.

SMSF member limit increases to six

The SMSF member limit has increased to six, up from previously only allowing only four members.

Although the law allows SMSFs to have up to six members, the Trustee Acts of some states and territories (NSW,VIC,ACT,WA and QLD) still only allow a maximum of four individual trustees for SMSF and small APRA funds (SAFs).  Those impacted that want to take advantage of the increased membership will need to have a corporate trustee (rather than individual trustees) in order to satisfy the trustee limit contained in state or territory legislation.

SuperStream extended to SMSF rollovers

From 1 October 2021, SMSF trustees must use SuperStream to rollover any superannuation to or from their SMSF.

SMSF’s have been finding it difficult to obtain a electronic service address (ESA) with a service provider that can action rollovers and listed on the ATO register of SMSF messaging providers.

There are currently five ESA providers according to the ATO, and more ESA’s to be certified in the coming months (Australia Post- likely Feb 2022).

Since there are limited options to choose an ESA for the purpose of a rollover or transfer of an amount, this has caused issued for trustees to satisfy the three day requirement, which could cause SMSF breaches under the Superstream provisions if the rollover doesn’t occur within the three day period.

The industry is working with the ATO to identify a temporary solution which is more viable for SMSFs and trustees to remain compliant.

Single ‘stapled’ super fund rules for new employees

The ‘single default fund’ or ‘stapled super fund’ rules for employees who start new job on or after 1 November 2021 will have employer superannuation contributions directed to their existing ‘stapled fund’, unless they choose another fund.

This will help to protect their retirement savings balances being reduced by the costs of unintended multiple accounts, which are created when a worker changes jobs and does not nominate a superannuation fund.