It was always going to happen. The FSA has had its very own Dr Pepper moment over the application of social web for regulated businesses.
In asking what’s the worst that could happen if IFAs adopt such tools, the FSA has laid the precise conditions in which the worst that could happen probably will.
Slam-dunking the distinctly non-traditional application of social web platforms, such as Twitter and Facebook, into the FSA’s traditional financial promotions regulatory in-tray is ill-judged and ambiguous.
It risks deterring IFAs from adopting the medium to improve client engagement and reduce costs. Not only that but it also potentially discourages participation by consumers in the conduct of regulated businesses.
Because consumer participation improves regulation and, if you are sceptical, ask Thomas Cook or Thomson what a difference a website such as TripAdvisor has made to the way in which it goes about promoting its resorts these days.
Back in March, in a letter to outgoing Aifa director general Chris Cummings on why I thought this issue would emerge – and soon, I said: “I am very concerned that IFAs could become constrained by a paper-centric regulatory mindset very quickly despite as many as 40 per cent of their clients already having a social media profile – effectively cutting them out of an increasingly significant communications channel.”
Right on cue, the guidance issued by the FSA suggests that applying its rules to financial promotions using new media is no different to applying them to financial promotions through any other medium. If that were the case, the FSA would not feel compelled to issue guidance.
There is a misunderstanding about the way this medium works and there is a big distinction between using social networks to generate promotions for your business and as a means of engaging with new or existing clients.
The concern is that the FSA’s implication that a tweet or Facebook status message may constitute a financial promotion will simply create anxiety in the advice community about using such tools as a means of staying in contact with clients.
Social networks, as opposed to more traditional media, have huge potential in helping consumers engage in their financial wellbeing and the idea that tweets and Facebook messages could require disclosure of risk information is misguided. The FSA is seeking to apply regulatory principles, designed with one communication model in mind, to an entirely different model.
Traditional media exists for companies to push promotions, while users – including regulated businesses – are adopting social tools in order to participate and share. There is a subtle but significant distinction.
Evidence of the FSA’s lack of understanding of the subtlety is potentially very costly to regulated businesses in the long run.
Ian Thomas is a brand consultant at MRM