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FSA X Cainz debate: That social media positively contributes to one’s financial education

September 14, 2021
Editor(s): Daniel Li
Writer(s): Vickram Mehtaanii, Yasindu Athauda, Julia Hu

*The speakers in this article are competitive debaters, and therefore the views expressed may not necessarily represent their beliefs or the beliefs of the organisation they belong to.*


First Affirmative – Vickram Mehtaanii (Cainz)

Social media positively contributes to one’s financial education. The affirmative team would like to introduce by highlighting the ever-growing importance of social media since the COVID-19 pandemic began. Facebook has confirmed the increase in traffic across its platforms – Facebook, Instagram, and WhatsApp – is unprecedented across the industry and new records in usage are being set almost on a daily basis due to COVID-19. Moreover, nowadays younger generations in general tend to spend a lot of time on social media. Therefore, information and knowledge shared on social media is reaching an ever-increasing audience. Taking advantage of this, influencers and social media “gurus” have started creating content in such a way that it not only benefits themselves as their following grows, but it also educates those who view their content.

Previously, financial education would only be taught to those who had a keen interest in Finance. People would enrol in Finance courses to enhance their financial education, whereas the rest would have very minimal knowledge of finance. However, with the power of social media, those who were never passionate about financial education are now beginning to be exposed to, and develop their interest in personal finance. It is worth noting that world trading platform eToro experienced a 480% growth in Australian users in 2020 and CommSec – Commonwealth Bank’s trading platform – grew fourfold, signing up 250% more customers in 2020 compared with their normal yearly rate. This is due to the increasing number of people learning about stocks, investments, cryptocurrency, among others on social media.

The affirmative team also understands that there is a fine line between a person trying to increase their financial knowledge on social media and on the other hand, only seeking financial advice from “experts” without understanding the reason behind such advice. The affirmative team reiterates that we do not support the latter, and only encourage using social media to increase one’s knowledge about personal finance.

In such times when leaving home is not considered safe, the ease of access to knowledge on any topic is critical and thanks to social media, one can attain mostly free financial education from the comfort of their homes.


First Negative – Bryan Ha (Financial Student’s Association)

Social media positively contributes to one’s financial education. The negative team would like to start off by acknowledging the fact that financial information in all shapes and forms are being shared across social media platforms such as Facebook, Instagram, Twitter, TikTok, and not forgetting popular Reddit forums such as subreddit WallStreetBets and the Australian version subreddit ASX_Bets.

We would like to highlight 2 main reasons why social media does not necessarily contribute positively to one’s financial education, as well as alternative mediums to broaden one’s financial knowledge base.

Reason number one, the quality of financial education one would come across on social media is of great concern. Although Chapter 7 of the Corporations Act has clear penalties, stating individuals who give unlicensed financial advice can be subjected to a maximum of five years imprisonment and/or a fine of up to $126,000 and corporations can be fined up to $1,260,000. This law has not deterred self-proclaimed financial ‘gurus’ from offering unlicensed financial advice on social media. This is obviously a huge problem with no obvious solution, as we have recently heard from Australia’s Finance Services Minister Jane Hume who had rejected calls to address the burgeoning crop of influencers who have taken to social media to provide questionable financial advice. Senator Hume compared influencers who give financial advice online to “the bloke down at the pub who wants to tell you all about the really great company he just invested in – but with a much louder voice”. With the Finance Services Minister downplaying the problem of unregulated financial advice by unlicensed influencers, the quality of financial information being shared on these platforms is a key concern. Now this brings us to our next point, with the lack of regulation, and finance influencers having potential conflicts of interests, newbie investors have a good chance of being horribly misinformed. Dr Angel Zhong, a Senior Lecturer in Finance at RMIT, had found that “Investment advice provided on social media tends to encourage day trading, promote get-rich-quick schemes and FOMO (fear-of-missing-out)”. This coincides with the 1st speaker of the affirmative team’s argument where we understand and acknowledge that although there may be an increase in investing on major trading platforms, a retail trader’s knowledge derived from social media could potentially be dangerous.

Investors are influenced by unlicensed financial ‘gurus’ to invest in high-risk investment vehicles such as options, futures, cryptocurrencies with highly leveraged positions. To entice more buy-ins and expand their following, financial ‘gurus’ often post trades with huge % gains while conveniently leaving out the high level of risk involved. All is fine and dandy if the investor makes money, but remember, these are high-risk investment strategies that could just as easily lead to huge losses as a result of bias and poor financial advice.

Aside from using social media, one can opt to expand their financial knowledge through enrolment in regulated finance courses, or by soliciting the advice of certified financial advisors who have the right qualifications and expertise to advise on specific topics, or by picking up a book or listening to a podcast prepared by true experts on the ground and not self-proclaimed financial ‘gurus’ on social media.

Unlicensed financial advice is a prevalent problem in our society that has caused and will continue to cause huge financial detriment to unsuspecting victims, hence the strict laws put in place. Unfortunately, if these laws designed to protect investors from receiving unlicensed financial advice are not being applied to social media platforms despite the large audiences they attract, there is a real potential for serious damage to the users receiving unlicensed financial advice on these unregulated social media platforms.


Second Affirmative – Yasindu Athauda (Cainz)

Managing personal finance has always been a complex task. 

From identifying the best investments to potential pitfalls, from developing the ideal retirement fund to managing debt, navigating personal wealth can be challenging for many who lack a background in finance. The solution, at least to those who can afford it, is obvious; hire an expensive financial adviser or invest in a costly financial course. 

While both the above options have many merits, they are restricted to those who can afford it. Online financial education, while not perfect, provides a cost-free alternative to those who are not as privileged. The affirmative team would like to reiterate that they do not support simply taking advice on ‘’what stocks to invest in’’ or receiving tips on ‘’how to increase your returns’’ from financial gurus. Rather, the team argues that social media can render easy access to a wide range of information that breaks down esoteric concepts into layman terms, helping everyday people develop their financial knowledge; from learning about how to effectively assess a security or a market to even simply gaining awareness of the plethora of financial tools that are available to them. Importantly, this can be done at one’s own pace, without the exorbitant cost of financial advisors, and thus opens avenues to segments in society who previously lacked such an opportunity. 

Whilst the affirmative team agrees with the opposition team on the dangers that mainstreaming of the culture of ‘financial gurus’ and ‘crypto influencers’ presents, we re-emphasise the distinction between following these influencers (who often lack financial accreditation) with blind faith and using social media to widen one’s financial education. 

Furthermore, it should be noted that the inability to effectively regulate these social media financial advisers does not call for complete opposition to using social media for financial education. Over the last couple of years, social media companies and governing bodies have made strides in regulating misinformation and hate speech; something that could be extended to areas such as misguided financial advice. 

Therefore, the proposition highlights the affordable and equitable financial education that can be gained via social media platforms and reiterates that such platforms can help improve one’s financial education.


Second Negative – Jessica Ngyuen (Financial Student’s Association)

We would like to clarify that we do not completely oppose financial education on social media platforms. It is certainly true that social media can have a positive contribution to one’s financial education, but we emphasise that the net contribution, at the current time, is negative. The proportion of information that is genuine and useful is outweighed by information that enforces risky investments and get rich quick schemes to captivate ill-educated individuals. So while it may be easy to access financial information, the difficulty lies in filtering the genuine advice from the investment scams.

We cannot see this contribution being net positive without more regulation in this space. Unfortunately, as our first speaker highlighted, the federal government has refused to do this, as they believe it is beholden on the buyers to understand the risks of following financial advice and investing their income in high-risk assets. We hold the view that this is unfair, given that the government is relying on the same platform to teach younger people basic financial literacy skills.

Even with relevant disclaimers provided by financial influencers, the idea that complex and subtle issues such as assessing security and determining the best investment can be broken down into a 30 second TikTok or short post is unreasonable, and can lead to the development of dangerous misconceptions, which can be costly for the investors involved. It is not common knowledge that an investment promising x% returns may have several periods of negative returns where investors lose money and that leveraged investors should be compensated with higher expected returns. This creates a dangerous view that an investment with higher returns is automatically superior to a lower return investment, which is of course not true.

There is a thirst for financial knowledge from younger generations. Young people are looking for sources of financial education and the most accessible are from social media with about 41% of under 25 year olds sourcing investing information from Youtube. However, we don’t see social media as the right solution to this issue, because of the opportunity for individuals to exploit without yet being subject to the laws which govern unlicensed financial advice.

In fact, these ‘financial gurus’ are making money off their financial advice through advertising. Influencers have more incentive to take advantage of their audience by highlighting ‘get rich quick’ schemes to generate views and earn money. This is akin to the commissions for traditional financial advisors that the affirmative team argued against.

A solution we propose is the implementation of financial literacy in compulsory school education. We see this as having both the benefits of social media – low cost and accessible – and of professional financial advice – regulation.

According to the Victorian Department of Education and training, the purpose of a national wide sex education mandate is to give students access to reliable information to help build knowledge needed to make responsible choices. We believe a similar rationale may be applied with the implementation of national wide financial education. Just as we wouldn’t trust social media to provide clear sex education to younger generations, we shouldn’t be trusting social media to deliver financial education. It is clear that we are in changing times where investment opportunities have become more accessible to people, especially young people, and current education should reflect this, so as to avoid the costly misconceptions which can be developed from following social media ‘finfluencers’.


Third Affirmative – Julia Hu (Cainz)

Despite the negative team’s focus on ‘finfluencers’ and the detriments of their advice, the affirmative team would like to, yet again, highlight that financial education and financial advice are not the same thing. As we have stated previously, we agree that financial advice on social media can be misleading to those without financial literacy skills, but this only goes to further highlight the importance of having accessible financial education so that everyone is able to discern the difference between legitimate and illegitimate advice.

Indeed, we agree with the negative team in that “the difficulty lies in filtering the genuine advice from the investment scams”. However, they believe that social media is not the right solution to this issue and have instead proposed several alternatives. Despite this, it is an inescapable fact that social media has become a dominating source of news, information, and entertainment for much of the population. Thus, it becomes apparent that even if the opposing team’s proposed solution of financial literacy school programs is implemented, social media is and will still continue to have a pervasive and persuasive impact on its users. For example, in taking the negative team’s case of the national wide sex education mandate, it has not stopped students from seeking sexual education through social media, where in some instances it has become an even more trusted and relied on source of information due to the non-holistic nature of the current government mandated sex education program. This accentuates how the influence of social media has become inevitable, and thus we should be seeking to harness its power, rather than dismiss it.

Further, the negative team’s suggestions for people to take regulated finance courses, solicit experts, or even read a book still excludes those that are most vulnerable to financial scams from the appropriate information, as it privileges those with time, money, and connections. This reveals the inherent flaws within the opposing team’s solutions, and implicitly demonstrates that social media is currently the most equitable and efficient way for legitimate financial information to be accessed due to its free and convenient nature. Indeed, we have already seen the positive impact of such social media financial education platforms, such as Mandy Money on Instagram and YouTube, and Cainz’s Financial Fridays on Facebook and Instagram, which provides easily understandable financial education materials and can help facilitate a more broad and diverse demographic reach than the traditional solutions offered by the negative team.

Ultimately, in order to tackle the negative impact of ‘finfluencers’, social media provides a compelling platform for reliable, engaging financial education to be easily disseminated, so that everyone is provided with the tools to critically assess various forms of financial advice. Likewise, in an age where social media use is only going to increase, it would be foolish and unwise to only focus on traditional modes of education and communication. Hence, the affirmative team firmly concludes that social media positively contributes to one’s financial education.


Third Negative – Vinh Tran (Financial Student’s Association)

The negative team would like to recapitulate our main argument that we do not posit that social media contributes to wholly negative financial education experience. In light of this, it would be an overemphasis from the affirmative point of view that “it would be foolish and unwise to only focus on traditional modes of education and communication given the increasing use of social media”. As aforementioned by our second speaker, we strongly adhere to the crux that the contemporary net contribution of social media to financial education is negative. Let us clarify the term ‘net’ in that we do acknowledge the “pervasive and persuasive impact” of social media, but to the detriment of the affirmative team’s argument, its “free and convenient nature” confers temporary benefits which, eventually, might be overshadowed by the permanent harms on investors.

We would like to address the affirmative team’s point about the importance of accessing financial education in order for everyone to tell the difference between legitimate and illegitimate advice. The affirmative team does not provide specific evidence as to how an investor can have the astute and relevant financial knowledge to filter out abundant information on social media and ultimately distinguish between legitimate and illegitimate advice. This further lays the foundation for our earlier argument about providing financial literacy through compulsory education. Not to mention the fact contemporary users consist largely of young investors who are particularly susceptible to tactics and ploys employed by financial influencers. To this extent, the negative team does not propose an appropriate remedy for the increasing number of ill-advised information in the form of short Tik-Tok videos or short posts. Surely, this might help shed some light in the short term but given the myriad of information sources on social media, it might take young investors tremendous time to eventually discern between which advice is beneficial for them.

To further develop this point, we would argue that while we can acknowledge that social media is currently and if not the most dominating source of news, it is using tactics designed to keep us on the application for a longer time not to service our financial education. This comes across as dangerous as the majority of financial education that accommodates social media is information that is supposed to be eye-appealing and provides information that results in abnormal and risky gains. In tandem with this, we would like to strengthen our position about legitimate financial education sources, that is, courses and books. Albeit costly and time-consuming, we acknowledge that these can be flaws of our solution, however, this is the cost of being properly engaged and educated about financial choices.

Helpful and academic information comes at a cost and will largely be more worthwhile than information through channels that are free. However, we do believe that there is still information on the web that is free, such as Vanguard’s education guide and government-regulated Moneysmart or as proposed by the affirmative team Mandy Money on Instagram and Cainz’s Financial Fridays, though far dominated by sites manipulated by “finfluencers”. The importance lies in the investors’ ability to discriminate between useful and appropriate financial information in the long run and those on the opposite continuum. As we have stressed previously, the process of learning through trial and errors on social media and placing belief on young investors’ ability to self-didact through intricacies of financial information would be even more time-consuming, that is if they result in success at all.

On these notes, the negative team once again emphasises that even though the use of social media on financial education is unlimited and open to everyone, so that its power can be fully harnessed, this particular notion is self-deprecating as more access to financial information without proper regulation and appropriate former financial literacy might constitute more harms than benefits. This is not to say that we entirely dismiss the immunity of investors from making mistakes and falling for investment scams despite being financially educated through these means, but as compared with social media, they would have a better understanding of their pitfalls and expend less time on self-reflection. Therefore, the negative team concludes that social media net contribution to one’s financial education is negative.


The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Daniel Li
Editor

I am a first year Bachelor of Commerce student majoring in Economics and Finance. On a macro-level, I passionate about following and analysing economic policies on both a domestic and international level, but you can also often find me poring over empirical research regarding behavioural economics and strategic decision-making among individuals.

Vickram Mehtaanii
Writer
Yasindu Athauda
Writer

I am a first-year Bachelor of Commerce student with interests in Economics, Finance and international relations. I enjoy reading up about new research and trends and hope to improve my analytical skills as a writer at Cainz. I'm looking forward to collaborating with others and writing some insightful articles.

Julia Hu
Writer