Financial Promotion: Why advertise at all?

Why advertise in the first place?

When used effectively, advertising is a cost-effective way to reach a mass audience, discussing positive messages about the industry and your firm's services.

When done correctly, advertising can:

• Increase brand awareness

• Generate traffic

• Attract new customers

• Increase turnover

What's a financial promotion?

Financial promotion is broadly defined by the regulator as:

An invitation or inducement to engage in investment activity that is communicated in the course of business.

Financial Promotion rules have been combined through the FCA in terms of communication with clients. This includes:

COBS – communication with clients, including Financial Promotions

MCOB – Financial Promotions and communications with customers

There are essentially 2 types of promotions

1. Real Time
2. Non-Real Time

Real Time promotion focusses on the now, such as Face to Face visits, telephone conversations or client meetings.

A Non-Real Time promotion, the most common form dealt with via our firms, is anything written that is distributed to clients. Examples of this include, but are not limited to

• Adverts
• Articles / Blogs
• Websites
• Presentations
• Newsletters
• Brochures
• Sales Aids
• Communications issued, as standard, to more than one customer.
  
  

FCA Principles and TCF

When looking at Financial Promotions, the FCA principals and TCF are embedded into the system. For example, each firm should be paying due regard to the interests of their customers and treat them fairly while giving them clear and concise information in a way that fair and not misleading.

TCF outcomes

1. Customers can be confident they are dealing with Firms where the fair treatment of customers is central to the corporate culture.
   
   
2. Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.
   
   
3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
   
   
4. Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
   
   

General Marketing requirements

• Give your firm name in a full or shortened capacity (For example, Adviser Services Holdings Limited or ASHL)
• Give a balanced viewpoint of risks versus benefits (For example, if you are investing in the stock market, your investment will not always go up, it can go down and is not guaranteed)
• Information must be presented in a way that is likely to be understood by the average client it is intended for (for example, avoid large sections of jargon, remember many clients do not have your technical expertise in this area).
• Information must not disguise, diminish, or obscure important items, statements, or warnings (For Example, you must avoid having a 6-page brochure with 5 ½ pages of benefits, then a small paragraph on the risks)
• Equal prominence of the relevant risk through promotion (highlighting the risk of any promotion with your client/s)
• Any unregulated products or services are clearly referenced as not being regulated by the FCA if applicable (the most common example being tax advice).

Considerations for Good Practice

When promoting your service, it is important to consider a range of factors to achieve good practice. The table below highlights factors of good and bad practice in marketing promotions.

The key to good practice is prominence. Keep grouped information in sections. If you have a newsletter with one area focussing on equity release, good practice is to have the risks within that section rather than a generalised section at the end of the newsletter.

Transparency is key. Make it clear if there are different fees for your service, inform the consumer at the start they are not eligible for a policy with a pre-existing health condition for example. It is important to prevent wasted time of the provider and client, and this can be done so by making everything clear at the start of the process.

Key examples of good and bad practice within promotions

Good Practice                                 Bad Practice 

Both look quite similar but as you can tell from the good practice promotion, it has a risk warning box that is made clear to the consumer the impact Equity release can have. There is not an array of information embedded in small text at the bottom of the page. In this example, the risks warning is prominent and balanced.

Good Practice                                       Bad Practice

The example on the left is of a promotion that is fairly simple. It doesn’t go into a lot of technical information, avoids the use of jargon, and gives you a clear introduction and a section of ‘click here for more information’. The issue with the promotion on the right, is that it is near impossible to read the risk information at the bottom. Some of the information within that small paragraph is also not necessary on a basic promotion like this. They include information such as their address, charges in the future and all the information about the FCA however, in this capacity it is a case of overkill.

The promotion on the left has the simple wording explaining that investments can go up as well as down. Sometimes putting too much information in a limited amount of space distorts the message you want to get across.

Bad Practice 

One aspect to touch on in terms of bad practice and the false narrative ‘cherry picking’ data can show is highlighted in the graph above. Please note that these graphs are for illustrative purposes only.

A firm could easily choose to show a snapshot of data between April and July '20 which could be misleading to the consumer. Although as can be seen here there is a general increase, this graph does not include balanced information. For all intents and purposes, we've just got A, B, C, D, E, F and nobody really knows what they are.

The graph below shows good practice and what the regulator would expect.

Good Practice

This example shows detailed information so the consumer can compare each line of the graph. It is important to bear in mind the regulator would expect information to include whether they include or exclude adviser charges because that does have obvious impacts on the performance over the longer term. Additionally, platform costs, front manager costs, admin costs etc. so if you present a graph including these, you need to include a fair representation across the entire portfolio. In terms of a data set length, it is a regulatory requirement the data shows a minimum of twelve months.

Websites

Most, if not all firms now have some form of website for brand awareness which include recent content accessible to their consumers and the rules of marketing promotion apply whether it’s an article or an advert.

Most websites have a ‘contact us’ page so in terms of GDPR and data protection it needs to be clear how information is being used. These are all factors to consider when building your website.

As part of our service to members of Lyncombe, we provide templates that can be used to speed up some of the administrative parts of building a website, and we also offer support around designing the initial websites to ensure they are fresh, modern and compliant.

Overall, firms tend to have a 4 or 5-page site which includes a home page, about us, services we provide and contact us section. This can vary between firms but as long as the content is meting the regulations it is personal choice, and will often follow website layout trends.

Restrictions on financial promotions

There are some restrictions on financial promotions that are important to be aware of.

Pension cold calling - this is banned mainly to protect the consumers from unregulated schemes where criminals will encourage you to move your pension and never see the money again.

General cold calling – regulations state these are not to be done during unsociable hours of 9pm-9am and absolutely no calls on a Sunday.

Do not promote unregulated, high risk investment schemes – In rare occasions where you can provide evidence that certain people are going to be appropriate to receive high risk investments, they may be approved, however, this is not often the case. Generally speaking, these are not appropriate for retail consumers.

Do not use the FCA logo

Be aware of using premium rate telephone numbers – numbers starting with 08 or 03 for example or any numbers where your client will pay to call.

Social media

Social media is a difficult area, but it does still come under the financial promotions’ rules. Social media is a very cheap, quick and effective mode of communication to a large audience.

There is personal and in the course of business social media. In terms of personal, you are free to post what you want on behalf of your personal life, however, as financial advisers, if you are posting on a social media channel about finance and financial services, these are likely to be a regulated activity and therefore it must comply with the rules.

The FCA has a guide outlining their approach to financial promotion in social media.

The data readily available from Q2 highlights how high the expectations are of the regulator.

• Reviewed 451 promotions
• Resulted in 374 amends/withdrawals

Retail investments and retail lending are the sectors with the highest amend/withdrawal outcomes, amounting to 83% of interventions with authorised firms, 25% of which were against the retail sector.

58% of these involved website or social media promotions

Source review areas:

• 45% from our proactive monitoring
• 24% from consumers
• 15% from different areas of FCA
• 10% from UK regulators
• 6 % from firms
  
  

Financial promotions quarterly data 2022 Q2

Should the FCA assess that a financial promotion is misleading and/or does not satisfy their regulatory rules and guidance, they can:

• Ask the firm to change or remove the advert
• Ask the firm to write to customers who may have been misled
• War or find the firm
• Ban the promotion

Stationary

There is still inconsistency within stationary and the information it contains. In addition to the standard regulatory disclosure, a few key points your stationary should include are highlighted below

Letterheads (and emails) should include:

• Company name and status (Ltd, LLP or other)
• Full contact details (correspondence address)
• Companies house details

If partnership:

• The main business address
• Names of all the partners or where a list of partners may be inspected

Sole traders:

• Business name if one is used
• Name of the proprietor
• The main business address

Business cards

• No requirement to have one of the regulatory statements
• Individuals name
• Job title (to reflect position)
• Qualifications / letters
• Contact details / main office

Email footers:

• Electronic letterhead and business card
• Data security wording

This guidance is just one of the ways in which the Network can help support your financial advice practice. To find out more about our enhanced business support services, get in touch today.