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FSA takes tweet and sour approach

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

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Exasperated me 30th June 2010 at 4:23 pm

    How about downapub.com? Or nineteenthhole.com? Or locallodge.com?

    The only difference between the traditional method of socialising and these things on t’Internet is that one lot is there for all to see!

    The FSA works within ‘rules’ and ‘regulations’ it makes in an attempt to… not sure what it is all about really, the world moves on but the regulators stand still.

  2. I agree that an updated regime is required (or at the very minimum some useful, additional guidance). However, it should be clear to everyone out there that a client somewhere will, at some stage, act on the ‘advice’ they believe they have received from an IFAs Twitter or Facebook page. Advisers need to be sure they protect themselves from this. Many will say they do, but I know many don’t just by looking at the circulars I regularly receive through my letter box. This is a much riskier medium to contact clients through and needs careful consideration. New media is a useful tool, but a HUGE risk to your business if done incorrectly. I recently received a letter from a large IFA with the headline, “Taxes will rise, and so will the stock market”. Imagine that on Twitter!!

  3. Couple of points. The FSA categorically stated two years ago in April 2008 that any employee that has access to customer data should not have access to Facebook, Messenger and by implication Twitter. For many firms, it is very difficult to allow some employees to use it and otehrs not to without clear and enforceable procedures. Besides, do you trust some and not others?
    Secondly, the FSA found specific failings as well as good examples. They have every right to point out that social networks can be misused and that forms have a responsibility to use them correctly and properly as they do all other marketing methods.

  4. Philip Calvert 30th June 2010 at 4:42 pm

    An excellent and well considered piece Ian.

    At IFA Life, we have been studying how IFAs use Social Media since 2004. Almost without exception it is being used responsibly and well – albeit it some of it is a little tedious.

    The financial advice profession has found its niche with the medium – and for the most part it is not being used for financial promotions. (Indeed, if anyone in any industry uses Social Media for Selling – then they are probably using it incorrectly.) IFAs are mostly using Social Media to network with each other, to share best practice, to debate industry issues, to listen to consumers, clients and commentators – and occasionally to add value to client relationships. Note ‘add value’ – not sell.

    This is a case of the FSA trying to make a point on something they don’t really understand, but they are correct in that it is the message that they are interested in – not the medium by which it is communicated.

    We’ve all heard the expression ‘people buy people’. And that’s what Social Media is really all about – there’s a clue in the word ‘social’.

    If your role is to keep an eye on how IFAs promote their services, then I can’t blame you for doing your job – particularly if a potentially sexy new marketing tool comes along. But what’s really important is that you don’t over regulate when you don’t really understand what you’re looking at.

    The Social Media in Financial Services conference in January this year really got under the skin of this whole subject, and I invite the FSA to attend the next conference in November this year.

    http://www.ifalife.com/SocialMediaFS2

    Philip Calvert
    IFA Life

  5. “Evidence of the FSA’s lack of understanding of the subtlety is potentially very costly to regulated businesses in the long run.”

    FSA lack of understanding – quelle surpris?

    The FSA’s key policy makers have all conspicuously failed adn continue to fail – can anyone name a single, genuine regulatory success?

  6. Chris Wicks CFP 30th June 2010 at 7:34 pm

    Phil’s comments are, as ever well balanced.

    The thing about social networking is that it is liberating and in the moment. People communicate with each other and circulate information with comments (informed or otherwise) on the spur of the moment. It is difficult to see how this type of culture can possibly fit in with the hugely cumbersome financial promotions regulations which are used to regulate adverts and off the page promotions. For one thing, given that a tweet is restricted to 140 characters, I fail to see how it can possibly made compliant!

    As Phil has pointed out, most people using social networking use it to enhance their credibility, increase awareness of them and and to generally widen their network of potential introducers as well as to exchange ideas with others in the same industry. Actual selling on the web is a wholly different thing and is obviously covered by the regulations. Note that this applies to all businesses, not just financial services.

    If the FSA are going to prescribe rules for ‘social networking’ what about just ‘networking’. I can just see it, as you potter amongst the other attendees, before you say anything about yourself you will be required to issue a disclaimer, disclose yourself, issue warnings etc…. Where do you draw the line? What if you meet someone down the pub and they ask what you do??? Well, I usually find it best to lie anyway since telling them I am an IFA is a bit of a conversation killer! Trouble is, fighter pilot or fireman don’t ring too true with my girth!
    Disclaimer.. Only kidding.

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