The Financial Conduct Authority (FCA) has circulated a discussion paper on strengthening financial promotions rules, in particular in regards to any higher risk investments. What could any tightening of the rules mean for marketing professionals?
Financial promotions or adverts are likely to be one of the most regular forms of contact consumers have with regulated financial services firms, especially those for whom they are not already a client.
Financial promotions can take the form of websites, social media posts, and content marketing such as advertorials, alongside more traditional forms of display advertising.
Therefore, a large proportion of the daily working life of a financial services marketing team is likely to be touching on financial promotions in some form.
The FCA regulates promotions for most financial services, with the power to ban a promotion that it deems to not to be unfair, not clear or misleading. The regulator can prevent the promotion from being used or can get it withdrawn.
In the first quarter of 2021, the FCA reviewed 411 financial promotions which were identified by a combination of external complaints and its own reviews. A total of 105 promotions were either amended or withdrawn.
Digital media appears to be the area where the FCA sees the highest proportion of firms not obeying its rules. Three quarters of the 105 promotions that were amended or withdrawn in the first quarter of this year related to either website or social media promotions.
A number of recent high-profile financial scams and failures, including London Capital & Finance, began with online advertising designed to reel in investors.
The FCA puts higher marketing restrictions on firms which it considers to be offering high-risk investments. In its recent discussion paper, the regulator said it is considering expanding its classification of high-risk investments to “help retail investors make effective decisions.” It is seeking views on whether more types of investments such as equity shares should be classified as high-risk investments, how it can further segment the high-risk investment market and what risk warnings they should have attached.
The FCA also asked whether there should be more requirements to monitor financial promotions on an ongoing basis.
Marketing professionals therefore need to keep a close eye on any financial promotions policy updates which are likely to come from the regulator in the coming months, especially those professionals whose firms operate in the retail investments space.
Any changes could both add to the workload of marketing teams, who may need to review/change all existing and upcoming promotions in light of any rule changes.
Team managers may also find they have a new training burden as they look to get all members of their team up to date with any changes and may also need to review their approvals processes.
Currently not all financial promotions come under the remit of the FCA, with some exemptions in place for a small proportion of regulated firms. Those firms which do not come under the remit of the UK regulator also do not have to stick to its rules.
However, with the rise in scam victims and widespread criticism from the FCA and others that search engines have failed to tackle online scam advertisers, search engines are making it harder for non-FCA authorised firms to advertise financial products in the UK without advance verification.
From August Google is changing its UK advertising policy to require financial advertisers to be verified in advance before being able to post any promotions. The new policy will take effect on 30 August, with enforcement starting a week later.
Most financial services firms will run financial promotions through Google at some point. Therefore, financial services marketing professionals need to make sure they complete their UK Financial Services verification with the search engine and remove any non-compliant promotions before 6 September.
Brandon Consulting Services Ltd 