New Delhi, Oct. 1 -- Finfluencers, or financial influencers on social media, have twice the reach that financial news websites and financial professionals have among investors, according to a recent survey by the Securities and Exchange Board of India.
The SEBI survey of more than 90,000 people across all major states and Union Territories found that finfluencers dominate the investors' information sources related to securities' market products. As many as 56% of those surveyed said that finfluencers were their source of information, compared with 28% who named financial news media and 25% who cited financial professionals such as investment advisors, chartered accountants and bank representatives.
SEBI's own investor awareness programmes seem to have a much smaller reach. Only 15% of those surveyed cited these programmes as an information source, and even that as part of the many such programmes conducted by various institutions such as the National Institute of Securities Market (NISM) and stock exchanges.
The biggest investment source continues to be trusted inner circles of family, friends and colleagues, with 59% of those surveyed citing them.
The rise of finfluencers as unregistered investment advisors, following the pandemic years, has been a problem that the market regulator has been wrestling with. Since they are not regulated, their reach and influence could be and have been abused to run various manipulative practices such as pump-and-dump scams and illegal portfolio management services.
SEBI did try to disrupt these unregistered advisors' revenue streams by cutting all their association with regulated entities such as brokerages and mutual funds, and this did result in many of the bigger finfluencers falling in line or vanishing from the scene.
But the latest survey shows that 62% of the investors still make their investment decisions based on finfluencer recommendations. Also, 93% of the investors found finfluencers to be moderate to highly credible, and finfluencers continue to be their information source even after the initial days of entering the market.
Overall, the survey captured a risk-averse population with capital preservation (80% of those surveyed) as the chief concern. This was a sentiment even among the younger Gen Z households (79%).
Other takeaways
While 63% of the households were aware of at least one securities market product including mutual funds, shares and AIFs, only 9.5% participated in the market. More people (53%) knew about mutual funds than stocks and shares (49%).
Only 36% of those surveyed possess high or moderate knowledge of securities markets, highlighting the need for sustained financial education, the survey noted.
Most people, 62% of those surveyed that included investors and non-investors, go to the police for grievance redressal. The next popular grievance redressal mechanism is the broker (22%) and finally SEBI (14%). While only a few approach the regulator, nearly 90% of those who do, reported satisfaction with the process.
The survey also noted that negative experiences by friends and family (32%) caused more to stop investing than getting lower than expected returns (28%).
Published by HT Digital Content Services with permission from VC Circle.