The regulator’s update to Australian financial services licensees last week was a timely reminder that social media is a double-edged sword. It is an effective and cheap way to reach a significant number of clients (and potential clients), but there’s a fine line between that and wandering into a potential regulatory minefield.

ASIC basically advised both those who are active on various platforms, and any licensees they are associated with, to take it easy when it comes to the sort of information they push out on the socials. Anything that might be construed as financial product advice is a no-go zone.

As ASIC pointed out, it’s sometimes easy to stray into financial product advice, even unwittingly. But ignorance is no defence, and anyone found providing financial product advice on social media could face some strong penalties.

That’s not to say social media doesn’t have a legitimate place in the communication and marketing armoury of properly authorised financial advisers. It does, and many advisers use it very well to stay in touch with existing clients and as a way of establishing a presence with potential clients.

Social media is fine to use when sharing facts about a financial product (or class of financial product) and you constrain yourself to describing the features or terms and conditions of that product or class of product.

But the moment you enter the realm of making any sort of recommendation that someone invest in (or sell) a financial product or class of product, then you’re straying into dangerous territory. At the very least you need to be licensed or an authorised representative of a licensee, and that’s where social media finfluencers may come unstuck.

ASIC’s own research suggests almost three in 10 (28 per cent) people aged 18 to 21 follow at least one finfluencer, and of those that do, two-thirds (67 per cent) have changed their behaviour as a result of what that finfluencer has told them. On the face of it, that looks like a challenge to the traditional financial advice model.

But recent CoreData research suggests strongly that people are not going to turn to social media in any great numbers to seek financial advice, and that a greater challenge to financial advisers as a trusted source of advice and information is likely to come from a growing legion of websites and apps.