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In July 2021, Sharan Hegde was a 25-year-old management consultant when Mint first highlighted the growing trend of financial influencers, or ‘finfluencers.’ At the time, working for PwC in Bengaluru, he had around 105,000 Instagram followers and was earning more from his social media promotions on 'financewithsharan' than his salary.
Fast forward to July 2024, Hegde is one of India's most-followed financial influencers with approximately six million followers across various platforms. His annual revenue is now around ₹60 crore, with about 85% derived from selling courses through his 'One Percent Club.'
Hegde has also ventured into a registered investment advisory (RIA) business, raising significant regulatory questions. Should social media influencers provide financial advice through their RIA entities, and what implications does this have for Sebi's advertising rules for RIAs?
Finfluencers are often funded by brokers and financial services firms for promotions, but these collaborations are not always transparently disclosed. Hegde himself was reprimanded by the Advertising Standards Council of India (ASCI) for an undisclosed Instagram ad for Cred.
A significant challenge posed by finfluencers to Sebi's regulations was their unregistered status. While charging for financial advice without Sebi registration is prohibited, offering free advice via social media falls into a regulatory grey area. As the number of finfluencers rose, Sebi proposed separating them from the regulated financial system in a consultation paper in August 2023.
Hegde received ₹10 crore in funding from Zerodha's co-founder Nikhil Kamath in October last year and registered a new company, One Centurion Ventures Pvt. Ltd, with his business partners. This company acquired an RIA licence under the brand 'Personal CFO,' forming an ecosystem with his other brands, Finance with Sharan and One Percent Club.
In June, Sebi announced a decision to bar regulated advisory firms from collaborating with unregistered finfluencers.
Hegde himself doesn’t meet the stringent criteria to be an RIA, relying instead on Diksha Shukla, a former portfolio analyst, for the license. Hegde has ambitious plans for Personal CFO and One Percent Club, needing hundreds of finance experts to meet demand.
However, there are compliance issues. The website “thepersonalcfo.in" lacks the entity name holding the RIA license, complaint details, and the mandatory Investor Charter. Moreover, Hegde's personal qualifications do not meet the requirements to be a ‘Person Associated with Investment Advice’ for the RIA.
Sebi's advertising code for RIAs is a potential minefield for finfluencers, as they must be cautious about content that could be construed as investment advice needing prior approval. Hegde's social media following acts as a funnel for his RIA business, yet compliance with the Sebi advertising code is essential for each post.
There is confusion over whether social media posts are considered advertisements. Recently, a hiring post by Hegde did not highlight the RIA registration number, which Sebi's appointed authority, BASL, might consider a violation of advertising rules.
Hegde's business model presents challenges for Sebi. Can a finfluencer act as a lead generator for an RIA app without strictly following Sebi's advertising code? Sebi's decision to cut off regulated firms from unregistered influencers might require stringent enforcement to maintain the distinction between RIAs and finfluencers.
Ultimately, Hegde may need to decide between being an educator, influencer, or RIA. For Sebi, the choice to enforce the advertising code strictly or allow the lines to blur will be crucial for the future of financial advice regulation.
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