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
| It is important to bear in mind that there are only so many clients a firm can serve, so while advertising is a great way to improve turnover, each firm must understand firm limits to still provide a great service to their clients. |
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
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
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
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.
| Good Practice | Bad Practice |
|
Jargon Free and Technical information kept to a minimum, so information is understood by the client |
High level of jargon and technical information that is not understood by the consumer |
|
Full, detailed, and balanced information including prominent risk warnings Risk information appears on the website landing page that the customer first arrives on. Warnings are repeated throughout the website Key relevant phrases are used such as:
|
There are no clear risk warnings and are only accessed through significant scrolling or multiple page links |
|
Pertinent information is close to each other i.e., risk warnings about a specific topic is in the same section as the topic itself. |
Important information is hidden or absent |
|
All criteria including exclusions are made clear. An objective data set is used. |
Age or health exclusions for example are not made clear ‘Cherry picking data’ not including an objective viewpoint but providing a snapshot of data that is not reflective of ongoing trends. |
|
The product has a clear target audience |
No consideration for target audience |
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.
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.
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.
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 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.
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:
Should the FCA assess that a financial promotion is misleading and/or does not satisfy their regulatory rules and guidance, they can:
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:
If partnership:
Sole traders:
Business cards
Email footers:
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.