In today’s Finshots, we explain why a front-page ad in an Indian newspaper has got people talking about financial influencers.

The Story

“Trust only the real experts”.

That was the big bold message on the front page of The Economic Times yesterday.

And this was accompanied by an even bigger image of Rachana Ranade*. She’s a chartered accountant turned YouTube influencer.

And guess what? The ad wasn’t taken out by Ranade. It was actually issued by YouTube as part of a campaign called ‘Hit Pause’. The goal was simple — to educate people about the perils of consulting fake gurus on matters related to investments (and other stuff). It encouraged people to pause and research (on their own) before acting on such advice.

At first glance, it seems like a sensible ad? And they’ve used a popular YouTuber to bring home this message. But a few people are miffed at this ad. They think its problematic. How so?

Okay, forget everything we’ve said so far. Ignore the fact that we said that it’s a public service announcement. Rather, when you see the ad for the first time, what does your brain automatically tell you?

We’d bet that your first thought is that YouTube is telling you that Rachana Ranade is the expert you should trust. It seems to be a tacit endorsement of the influencer.

Sure, the ad is quite clever. It doesn’t really mention the words ‘investments’ or ‘stocks’ anywhere. So YouTube could argue that it’s not saying that Rachana Ranade is an expert in these matters. But it’s not that hard to come to this conclusion, especially because people might quickly look up her handle (which is also mentioned in the ad). And when they see that she creates videos about stocks and investing, they might believe that YouTube has already done its due diligence. They'll likely think its a stamp of approval.

And that’s what has annoyed a whole bunch of people.

But that's not all. We also have to talk about Registered Investment Advisors (RIA)** in India - folks licensed to give investment advice. Now RIAs are already an endangered species. There are only 1,328 RIAs spread across the country. And if you consider the number of people who invest in mutual funds, you'll see that there’s just 1 RIA per 26,000 investors. It’s quite an abysmal figure.

And there are a few reasons why the tribe of RIAs haven’t grown by leaps and bounds in India. For starters, it’s tough to get people to pay for financial advice. No one wants to. But the other problems stem primarily from all the compliance stuff these folks need to undertake to keep their business running. For starters, there’s an upfront cost (a few thousands if you are an individual and a few lakhs if you're a corporate) to get the license. There’s also the headache of dealing with audits and the frequently changing rules. There’s the matter of storing all client communication with authorised providers. And then the regulator even asked all RIAs, including those who’d been successfully advising clients for over two decades, to go and get a post-graduate degree like an MBA. Finally, a couple of months ago, SEBI decided to turn the screws a little bit more and said that RIA’s would need to take SEBI’s permission and pay a fee before making any advertisements. It said that the advisors shouldn’t use superlatives such as ‘best’ or ‘leading’ to describe themselves. And from the reading of the circular, it basically even prevents them from discussing stuff like past performance in their newsletters.

So yeah, RIAs are trying their hardest to dot the i’s and cross the t’s in their business.

But most influencers don't have to do any of this. And yet, they're the 'real experts'. So you can see why people are angry about this disparity. Having said that, you could also make an argument that this isn't Rachana Ranade's fault. YouTube took out the ad and many people do endorse Rachana Ranade and the work that she's done. So maybe YouTube should have been a bit responsible here?

Anyway, all this brouhaha around this ad could lead to a change — the government might actually step up its efforts to regulate influencers. Sure, Finance Minister Nirmala Sitharaman said a couple of months ago that she hasn’t received any proposals to regulate financial influencers. But right now, even the government has been dragged into this controversial YouTube ad.

How’s that, you ask?

Well, look back at the ad once again. There’s one more logo at the bottom of it— the State Emblem of India alongside the Ministry of Electronics and Information Technology (Meity)! And that makes it seem as though even the Indian government is giving the thumbs up to the influencer.

So once people began asking questions, Rajeev Chandrasekhar, the Minister of State at Meity quickly jumped on Twitter to clarify that it wasn’t a government endorsement of any influencer.

But a tweet isn’t enough to correct a perception built by a front-page ad in one of India’s leading English language dailies, no?

So yeah, maybe this slightly embarrassing moment will spur the government and SEBI to act more judiciously. And ensure that there are some guidelines for influencers too.

Until then…

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**We do discuss stocks on the Finshots YouTube channel and newsletter. And while our explainers are for general informational purposes, we’d like you to know that our registered entity Tacterial Consulting Pvt Ltd is an RIA bearing licence number INA000015127.

*Tacterial Consulting Pvt Ltd, our registered entity has used the services of Rachana Ranade to promote Ditto, our insurance advisory service.

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