Rise of the Finfluencers

Amidst the chaos that engulfed Mumbai in 2020, a city torn between the ravages of the Covid-19 pandemic and the frantic frenzy of its financial markets, a remarkable story emerged. As the stock market soared to unprecedented heights from its low in the pandemic, a wave of prosperity swept through the streets, attracting seasoned investors and a new breed of opportunists, the retail investors.

Amid this whirlwind, nestled in the vibrant city of Pune, resides Rachana Ranade, a chartered accountant turned teacher with a captivating secret. Through the power of YouTube, she weaves a tale, unlike any other, captivating a staggering 2.78 million subscribers with her unconventional teachings. Her lessons transcend traditional financial wisdom, delving into the realm of analysis and investment strategies.

She is just one of the top finfluencers in the country. The list also consists of established broking firms with channels on different platforms.

When India was transitioning towards a digital economy, a remarkable phenomenon unfolded, fueled by the unexpected circumstances brought about by the pandemic. This was the rise of the "finfluencers," a new breed of influencers who harnessed the power of social media platforms such as YouTube, TikTok and various others to captivate audiences with their financial expertise.

Finfluencers A.K.A Gurus of Finance

In simple terms, a finfluencer, short for the financial influencer, provides regular investors with information and guidance on various financial subjects like stock market trading, personal finance, mutual funds, etc. These individuals predominantly use YouTube as their preferred social media platform to share videos, often in Hindi, regional languages, or a mix of Hindi and English (known as 'Hinglish') to appeal to non-English speaking investors from smaller towns. These finfluencers have gained a massive following, with the most popular ones amassing millions of subscribers.

The rise of finfluencers is not limited to India. According to a report from Statista, a German company specializing in market and consumer data, the global market size of influencers discussing topics such as fashion, gadgets, health, beauty, and finance on social media has grown exponentially. In just five years, it has increased eightfold, going from $1.7 billion in 2016 to nearly $14 billion in 2021. What's even more remarkable is that the market size more than doubled from $6.5 billion in 2019.

Let’s look at some of the top finfluencers of India.

What Exactly Gave Rise to These Finfluencers?

These short videos, ranging from 10 to 20 minutes, have gained immense popularity in India due to the country's low financial literacy rate, which stands at 27 percent, per the National Centre for Financial Education's 2019 survey. As a result, many first-time investors, particularly from remote areas, are attracted to these finfluencers.

Source: Business Today

Apart from retail investors, new-age broking firms built easy-to-use apps, affordable smartphones, cheap data plans and the ubiquity of digital payments helped these finfluencers to grow.

Strategies Behind Increasing Subscribers

Let’s have a look at some influencer’s strategies that they are using to garner subscribers:

• Pranjal Kamra focuses more on financial education and awareness rather than stocks. Apart from creating content, his company Finology Ventures Pvt. Ltd also provides products like Recipe for personal planning and Quest, which are courses on finance and investing etc. He also collaborates with broking firms
• Rachana Ranade follows a strict routine of posting 8-10 videos monthly - each on Wednesdays and Saturdays. She also does one live stream where she interacts with her viewers
• Asset Yogi’s Mukul Malik started his YouTube channel focusing on real estate, but his success came after he pivoted towards topics like the stock market and personal finance
• Ankur Warikoo is a financial, health and lately, love guru who creates content for Genz and the young generation. His videos on financial planning and personal finance are popular and have helped him position himself as a knowledgeable source

Hold On! There Are Bad Apples Too

How do you verify the legitimacy of these finfluencers? For financial instruments like bonds, stocks, debts, etc., there are rating agencies like CRISIL, ICRA, CARE, etc., which provide good or bad ratings for these instruments belonging to the companies.

On the other hand, no one can verify that these finfluencers are right or wrong, legitimate or illegitimate. It is one’s perception and judgment to follow these finfluencers. If it is a hit, people start following; if it is a miss, the influencer is doomed to fail.

Below are some of the finfluencers under SEBI's radar:

• Mohit Jain, who has over 1 million followers on YouTube. SEBI recently issued Jain a show-cause notice for allegedly providing investment advisory services without the requisite registration
• Deepak Shenoy has over 500,000 followers on Twitter. Shenoy was also recently issued a show-cause notice by SEBI for allegedly making false and misleading statements about his investment performance
• Sahil Baghla has over 300,000 followers on Instagram. SEBI recently investigated Baghla for allegedly providing investment advisory services without the requisite registration

But let’s look at the most famous of all: P R Sundar.

Who is P R Sundar?

Recently, the Indian stock market watchdog, SEBI has sent a strong message to financial influencers with its action against P R Sundar known for providing investment advice. The regulator has directed Sundar, his company Mansun Consultancy and Mangayarkarasi Sundar to disgorge Rs 6.07 crore, including interest at 12% per annum from June 1, 2020, till the date of submission of the settlement terms.

A former mathematics teacher, P R Sundar has amassed a sizeable following by creating a niche. He is one of the country's top futures and options (F&O) traders, making videos on strategies relating to the derivatives market for his nearly 6.45 lakh YouTube subscribers.

The Chennai-based financial influencer states he is an F&O trader, specifically focusing on selling options. He claims he believes in sharing his expertise and therefore focuses on derivatives. As a result, he has garnered many high-net-worth individuals (HNIs) as followers, with 10 percent of his followers being from outside India.

What Went Wrong for P R Sundar?

P R Sundar was penalized by SEBI for providing investment advice without the necessary registration from the regulator. SEBI directed him and his company Mansun Consultancy and co-promoter Mangayarkarasi Sundar, to disgorge (surrender) Rs 6.07 crore, including interest and settle the case with SEBI.  

SEBI's examination revealed that Sundar operated a website offering advisory services and received fees through a payment gateway linked to Mansun Consultancy. The settlement terms include refraining from buying, selling, or dealing in securities for one year.

Caught in the Crossfire

The action taken by SEBI on P R Sundar, a prominent finfluencer, sets a precedent and sends a strong message to other financial influencers. This development may lead to increased scrutiny and accountability for other finfluencers, encouraging them to ensure compliance with regulations, maintain transparency and provide accurate and responsible financial advice.

What Is SEBI Planning to Do Now?

• SEBI is planning to implement regulatory measures for financial influencers or finfluencers.
• Discussions are underway regarding the regulation of stock brokers who have revenue-sharing arrangements with finfluencers
• The practice of finfluencers promoting affiliate links for trading accounts without proper disclaimers has raised concerns
• SEBI is considering measures to ensure transparency and prevent finfluencers from encouraging excessive trading for personal financial gain
• SEBI has prohibited mutual funds, registered investment advisors (RIAs) and research analysts (RAs) from advertising through influencers with over 10 lakh subscribers
• SEBI is consulting with representatives from the RIA community regarding the new advertisement code released by BASL, which includes upfront fees for advertisements

Words of Wisdom for Readers

As the world of finfluencers evolves and regulatory measures come into play, it's crucial that you approach financial advice with caution and critical thinking:

• Do your research: While finfluencers can provide insights and information, it's crucial to conduct your research and make informed decisions
• Diversify your sources: Don't rely on a single finfluencer for all your financial decisions. Seek information from multiple sources, including professional advisors, financial institutions and credible news outlets, to gain a well-rounded understanding
• Seek professional guidance: If you're unsure about financial matters or need personalized advice, consider consulting with registered investment advisors (RIAs), financial planners