financial promotion - high-level view

Financial Promotions – high-level overview

© 2015 All rights reserved. www.lscprom.co.uk

• UK financial services regulation

• Advertising spend

• What is a financial promotion

• Why are financial promotions important

• Industry Issues

• Social media

• Stand-alone compliance

• Prominence

• Treating Customers Fairly (TCF)

• Financial Conduct Authority’s approach

• Lemon Squeezy Consultancy


• The UK financial services industry is regulated by the Financial Conduct Authority (FCA). They are accountable to the treasury and, through them, to Parliament.

• They are operationally independent of government and funded entirely by the firms they regulate.

• They have rule-making, investigative and enforcement powers that are used to protect and regulate the financial services industry

• The single strategic objective of the FCA is to ensure financial markets work well so consumers get a fair deal. Its 3 operational objectives are:

1. To secure an appropriate degree of protection for consumers2. To protect and enhance integrity of the UK financial system3. To promote effective competition in the interest of

consumers.


UK financial regulation


Advertising spend

TV - £284,103,133

Press - £179,941,896

Outdoor - £239,749,064

Direct Mail - £160,594,023

Radio - £11,556,440

Door Drop - £200,902,933

Internet - £41,924,163

Spend (£)

Source: FSA website 24/04/2010

A financial promotion is a communication that is an invitation or an inducement to engage

in investment activity.

In other words, there is an element of persuasion. An inducement is intended to lead, ultimately, to an agreement to engage in investment activity.

The term 'engage in investment activity' refers to 'controlled activities' and 'controlled investments'. This generally includes firms that provide or advise within the following sectors: mortgages, insurance, banking, investments and consumer credit loans.


What is a financial promotion

Financial promotions can be communicated through but not limited to:

• General Advertising in magazines, newspapers, radio, TV and websites

• Email

• Banners

• LED screen advertising

• Mail shots - written correspondence

• Sales Aids and Sales Scripts

That’s not all.

It is important to realise that the rules cover all communications by regulated firms to clients, not just promotional ones. The rules that apply to non-promotional communications are fairly high level. The main one is the rule that communications must be

clear, fair and not misleading. © 2015 All rights reserved.

www.lscprom.co.uk

What is a financial promotion


Consumers depend on the products meeting their expectations

Products meeting expectations is one of the TCF outcomes.

Differences between products might be subtle, and not very obvious. The one of the left is a V8 engine, whereas the one on the right is a mini engine – promotions need to reflect that and inform customers clearly.

• Financial promotions are a firm’s shop window

• Asymmetry of information and power

• Consumers rely on them when shopping around for

financial products – you can’t test-drive them

• … and those products are important for the financial well-

being of consumers


Why are financial promotions important?

• Media neutral banners can be a form of promotion

• Social media - you can use social media such as

Twitter and Facebook

• Stand-alone compliance there is no ‘one click’ rule

• Prominence ‘roll over’ risk warnings are not adequate

• Does the customer qualify for the offer/deal? you must

clearly present any ‘show-stoppers’


Some current financial promotion issues

• Balance

– Key objective of marketing is to attract as many potential customers as possible the regulator often sees marketing promoting a product in an unbalanced way, which is ultimately unfair for the consumer.

• Clarity

– When buying, a consumer needs to be clear on what they are purchasing so that they are making an informed choice.

• Not misleading

– Firms hold the balance of power because they have greater knowledge of the product or service.


Issues to avoid


Social Media

The FCA social media guidance covers a range of

topics, including where responsibility for

compliance stands when retweeting, forwarding

or sharing others’ posts; the use of hashtags to

distinguish adverts; and the use of risk warnings.

It also provides a reminder of the regulator’s stance

on approval and record-keeping, and the fact that

this applies equally to social media.

It illustrates its points by giving some useful visual examples of compliant and non-compliant digital content; if you want to read the entire 20 pages, the document is available on the FCA’s website:

http://fca.org.uk/your-fca/documents/finalised-guidance/fg15-04





Social Media

• Risk warnings for social media

One of the key points is around risk warnings, which it says apply to social media in the same way as for any other medium.

This means that each communication via social media needs to comply with the relevant rules on a standalone basis, rather than –for example – referring a consumer to a website that contains the relevant compliance information.

In practice, this means that tweets cannot be promotional at all, simply factual, as there is no space in the 140 character limit to include a risk warning. FCA guidance gives examples of tweets that would be compliant and non-compliant under this new rule.


Social Media

• Financial promotions on Twitter

Another change relates to hastages, and particularly the use of ‘#ad’. Whereas previously, and in the consultation paper, the FCA had suggested that firms use the hashtag #ad to identify financial promotions on Twitter, it has decided that using a hashtag is not sufficient as a way to signpost promotional content.

Because clicking on a hashtag will take users to a curated page showing every tweet that has recently used that word or phrase –and it may not be immediately obvious to a consumer that not all this content is related to, or under the control of, the firm in question – the regulator believes that using a hashtag in this way is potentially confusing.

.


Social Media

• Financial promotions on Twitter

The guidance also clarifies the responsibility for content when you retweet, share or like social media posts. During the consultation, the regulator was asked whether commenting on, ‘favouriting’ or otherwise interacting with posts by others are considered financial promotions.

The FCA states that if a firm retweets, shares or likes a consumer’s post, they may fall under the financial promotions rules. The guidance says that, ‘if the customer’s tweet comments on or endorses the benefits of a regulated financial product or service, then sharing or forwarding by the firm will constitute a promotion by the firm’


Social Media

• Approving digital and social media

The updated guidance is also used to remind firms that they need to have ‘an adequate system in place to sign off digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation.’ The immediacy of social media means that a compliant process for sign-off and accurate record keeping can both be overlooked. The new guidance makes it more crucial than ever that you have a robust process of approvals and record keeping for social media.

Automating this process can save marketing and compliance teams significant time and money, as well as ensuring that you stay on the right side of the regulator.

• Every financial promotion must comply with all of the relevant financial promotions rules.

• It is not acceptable, for example, for firms to omit important risk information just because they intend to give it later in the sales process.

• All financial promotions must be stand-alone compliant, regardless of their form, content, location or target audience.


Stand-alone compliance

• Prominence can be defined as ‘the state of being easily seen’, i.e. in terms of a statement within a financial promotion, ‘likely to attract attention, for instance, by virtue of its size or position’.

• Prominence can be subjective – something that may appear clear to one person may not be to another.

• Compliance will look at prominence in the context of the promotion as a whole.


Prominence

• Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly

• Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale

• Consumers are provided with products that perform as firms have led them to expect


Treating Customers Fairly

To make markets work

well so consumers

get a fair deal


FCA approach

• FCA are more intrusive and consumer-focused

• Repeat breaches

• Significant Influence Function (SIF) attestation

• Disciplinary action


Financial promotions - breaches

• The power to ban financial promotions and publicise details of the action taken

• The publicising of the ban is intended to send a clear message to the industry

• The power is intended to be flexible, to deal swiftly with misleading advertising.

• The power to remove a product and stop selling.


Financial promotions banning power

• The FCA will give direction to an authorised firm to remove its own financial promotion or one it approves on behalf of an unauthorised firm, setting out the reason for banning it

• Firms can make representations to the FCA if they think the regulator is making the wrong decision

• The FCA will decide whether to confirm, amend or revoke its direction. If it is confirmed, they will publish it, along with a copy of the promotion and the reasons behind the decision.


How does it will work in practice

• To ban the ‘worse case’ promotions but also where there is a risk of other firms following suit

• They will not always measure harm to consumers in terms of actual or potential financial detriment, but will consider the impact of misleading information on consumers’ ability to make informed choices


Why ban?

1. Publications serve as a good educational tool for firms to better understand our rules

2. It allows the FCA to set out clearly our expectations on financial promotions in a way which has not been possible before

3. It serves as a deterrent to firms who intend to mislead customers or do not pay enough attention to ensuring compliance with the financial promotions rules


Publication of a banned promotion

A fresh approach to advertising regulation

By bringing together wide range of skills from marketing and creativity to compliance


Lemon Squeezy Consultancy

We offer a complete solution whether this is, in house compliance review consultancy of customer communications and marketing material, copywriting or design work. We tailor our services to your specific needs.


How can we help?

Our consultants work with you to ensure your advertising is compliant. We can look at telephone sales scripts, online content, customer communications and printed marketing material and provide assessments and recommendations.


Advertising reviews

It’s not enough to meet the regulators needs for marketing material Your marketing itself must based on the principles of selling the right products to the right customers. Our regulatory and customer insight experts advise you of best practice for a firm of your size and complexity.


Marketing review

Having worked in pressured regulatory environments, we understand the commercial, regulatory and internal pressures on your firm. We can work with you to set up internal approval systems that ensure you meet your regulatory obligations without tying yourself up in admin and paperwork.


Approval systems

Your printed materials, brochures and newsletters are often the most visible and tangible elements of any marketing strategy. Consistent, engaging design makes your literature stand out from the crowd, get noticed and most importantly, win you business.

Our team of graphic designers have many years’ experience in bringing your brand and identity to life. From creation of functional day-to-day documents such as business cards and letterhead to more proactive direct mail pieces, newsletters, exhibition stands and campaign material, we could help you create a suite of literature which communicate your brand, service and products


Graphic Design – Bringing Your Brand to Life

Copywriting is more than simply a description of your product or services – it is salesmanship in print, or on screen. You can see the difference between copy that is simply adequate and copy which is really effective in the return on your marketing investment.

Our copywriting team are expert in the financial sector, and motivated by a clear objective – to make your marketing deliver the results you want – while keeping your service, brand and business compliant.


Copywriting – creating more business

Marketing expertise is essential for your business. If you don’t have the resources you need in house we can provide them –offering you a cost effective way to deliver the marketing campaigns you need. We are committed to representing your brand, will provide expertise and experience, will work flexibly and integrate seamlessly with your team to ensure you get the most from your budget and that your promotions remain compliant.


Marketing support

Whether you are a small to medium sized business through to large corporation, if you need support for your marketing activities, from creating to compliance, we’d love to talk to you.

Lemon Squeezy Consultancy was set up to help firms with flexible, affordable support and recommendations for Business to Business as and when it is required.

Additional services below are not exhaustive:

• Digital marketing planning & Delivery• Management Consultancy• Business development• Stakeholder management• Developing products and services• Drafting internal procedures, processes and other material• Business & marketing strategy


Additional services

For more information please visit:

lscprom.co.uk


Contact us