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FSA warns over firms promoting award wins

Financial services firms that advertise the fact they have won industry awards could fall foul of the FSA’s financial promotion rules under recent guidance published by the regulator.

Final guidance published by the FSA on financial promotions, fund performance and image advertising says promoting award wins constitutes a declaration of past performance, if the award is based on performance, and should therefore conform to strict and restrictive rules.

Awards based on service are not affected by the guidance. However, the FSA says firms promoting awards judged on both service and performance, for instance, some adviser awards where portfolio performance is taken into account as part of the judging criteria, are likely to be affected. “We will look to apply this proportionately,” an FSA spokesman says.

Firms making past performance claims must adhere to strict rules including ensuring any such claims are not the most prominent feature of the communication. Past performance claims also have to include appropriate performance information for the last five years and a risk warning stating past performance is not a reliable indicator of future results.

The new guidance states: “The winning of awards can amount to an indication of past performance, depending on the context. As an example, if the award is for service or administration, then the requirements would not apply.

“On the other hand, an award that reflects the fund manager’s skill and expertise ultimately reflects the performance of the fund and the fund manager’s achievements and so trigger the requirements of Cobs 4.6.2R.”

Compliance consultant Adam Samuel says: “A ’fund manager of the year’ should not be expected to give five years’ worth of data for all its funds every time it mentions the award. Equally, the risk warning prescribed makes no sense for awards.

“The FSA has fudged the question of whether this requirement applies to IFA awards, which typically do not differentiate between the investment performance of their recommendations and service matters.”

Bestinvest senior investment adviser Adrian Lowcock says: “The need for performance figures restricts the ability to use an award in marketing material. I do not know many industries that prevent success and excellence from being congratulated.”


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There are 35 comments at the moment, we would love to hear your opinion too.

  1. Over-regulated, over paidover and here…although some are fleeing abroad.

    Of course, when politicians tell us that the FSA is a “world-class regulator” they must point to the awesome failures as well as those yet to come..

    Can’t have it both ways, boys.

  2. We all have to say we are regulated by the FSA. Does that not mislead the public into thinking we have an effective regulator that protects their interests…

  3. Jeez, haven’t they got anyting better to do?????

  4. Oh Oh. The thought police are back in town. Thank goodness the FSA don’t advertise on the basis of past performance.

  5. So in essence you can brag about how good your administration is, but not how well your fund managers have outperformed the other providers.

    Do these nut jobs not understand that the public is entitled to see this information without it being smothered in regulatory gobble de gook all the time.

    If fund manager A has achieved annualised growth greater than fund manager B, they should be entitled to put this information into the public domain, preferably within a structured environment such as Trustnet, so that WE as advisers can disseminate the BS from the facts.

    I am convinced now that the regulator only seeks to perpetuate this culture of finding fault with every aspect of our services.

  6. My word, I would rather know the company I dealt with had a track record with expertise! Then the warning that past performance is not a guarantee would be enough. Please God, save us from these people! If the FSA posted a list if their failures, people wouldn’t go near them for regulation! How much has it cost every man, woman & child financially because of their ineptness? How many jobs have been lost? How many millions of people will lose out on financial advice because of RDR?

  7. Good work everyone….

  8. As an award winning IFA going back to 1997 IMM awards,
    The FSA can go and *uck themselves they, are the biggest failures of all time! They are destroying the IFA Industry on purppose and with europe falling apart because of regulation from unaccountable people we are in for a very rough ride. I thought a change of government might help but they are All puppets of the Bankers!

  9. Have a totally unsustainable business model like Northern Rock and we will ignore it.

    Woe betide anyone that dares to advertise that they have performed well in the past – news for you Mr FSA past performance usually is a very good indicator of future performance.

  10. Of course, when politicians tell us that the FSA is a “world-class regulator” they must point to the awesome failures as well as those yet to come.

    Alan – you know better – no commenting on past performance – that includes the FSA failures

  11. Martin Bamford 17th May 2012 at 10:41 am

    If fund managers are using award wins (based on past performance) to indirectly publicise their past performance in financial promotions, it is only right that relevant disclaimers are included. This looks like sensible guidance from the FSA.

  12. I don’t suppose this was the FSA’s rationale, but they may (perhaps inadvertently) have a point. Anyone who has sat through any of the plethora of annual interminable awards evenings knows that at any given time it’s probably harder for a provider NOT to have an award to advertise, than it is for them to have one. It all makes the ads rather meaningless but the public probably wouldn’t know that.

  13. On this basis the FSA should urge the industry to scrap all award ceremonies in case the wider public should get the wrong idea.

    Well done XYZ company. You have won the “past performance is not necessarily a guide to future performance award”. However whatever you do please don’t tell anybody about it.

  14. There is a football team whose shirts declare ‘Deal like a pro…FX pro’.
    Is this a financial promotion? Should there be wealth warnings on the shirts?

  15. Don’t forget that some awards (though not all) come with a hefty ‘table’ fee. Don’t buy the table fee and you will not receive the award….. make your own mind up about how clear, fair and not misleading it would be to advertise to retail consumers with such an award.

    Additionally, the plethora of awards out there doesn’t help someone identify which ones are really worthwhile.

  16. Like the FSA bragging about its ‘Plain English’ award….they didn’t read the handbook did they??

  17. Scott Taylor-Barr 17th May 2012 at 11:13 am

    If you have genuninly won an award that has been judged on set criteria and is accountable if independently verified then you should be allowed to use it.

    If however you have “won” an award because you are the publications largest advertiser, are mates with the editor, or because your large BDM team have been out arm-twisiting advisers to vote for them – well that’s a different story.

    Good luck working out how to tell the two apart…

  18. Makes sense to me.

    While the FSA is guilty of a series of misguided rules, in this case I can’t help but feel it fair. If an award is received for the best performing fund in the last year but over 5 years it’s been absolutely terrible would it not be misleading to try to promote your award in the context of being a great fund manager?

    I’d wager a fair amount of FSA rules are made in response to misleading promotions so in this case, the industry probably does have itself to blame.

  19. More importantly which clown sits at a desk and thinks this s..t up???? Beggars belief

  20. Julian Stevens 17th May 2012 at 12:07 pm

    The FSA never has nor is ever likely to win any awards for anything (well done) from any other body.

    What it seems now to be decreeing is that any regulated firm that HAS actually won an award or two for excellence in some field or other isn’t permitted to publicise the fact or, if it were to do so, it would have to be qualified with a warning along the lines of That was last year, but next year we may well entirely f*** everything up.

    Don’t you just love these guys?

  21. Larry in London 17th May 2012 at 12:29 pm

    From now on, all financial advice must be delivered in plain brown envelopes with no return address – the return address could constitute an advertisement which may influence the postperson to buy an investment he/she/it may not want and cannot afford.

    Blimey. Haven’t these nitwits got enough to worry about? — Their beloved Europe is sinking up to the proverbial armpits in euro doggy doo and all they can worry about is preventing people advertising the benefits they have brought to clients!

    Truly, the regulator is bonkers!

  22. Andrew Jackson 17th May 2012 at 12:32 pm

    @ Martin Bamford and Austin Mason.

    I can only hope that you had your tongues firmly in your cheeks as you typed your remarks.

    In my various compliance-related roles over the last 22 years, I’ve reviewed many files and don’t believe I have ever come across a single client who has made an investment decision based solely, largely or slightly on a fund manager’s awards.

    Therefore, the FSA is wholly wrong to begin any sort of review of this area. There are many areas in which the FSA should be looking but this is not one of them.

    The presence or otherwise of a risk warning, past performance data etc simply does not pose a significant risk to the statutory aims of the FSA.

    They should focus their efforts – which are funded by us – on spotting the next Northern Rock, Arch cru or KeyData and dealing with it properly.

    If they were to do that, it would protect the most important people in our value chain – the clients.

  23. How mind numbingly petty minded. These sressot are so vacuuous it defies belief.
    The power of Stalin, coupled with the intellenct of a chimp.Horrendous.

  24. I agree – its funny how people who know people get awards. So they arent worth the paper (award) they are written on anyway.

    This then leads customers to possibly choose a business that knows someone who can sway a vote and then gets more business from it.

    The FSA are only lamented on here as they know what people do to get ahead – and they dont like it.

    I see their point – but you guys just see ANYTHING they do as restrictive.

  25. You really have to question the FSA and their methodology
    If they really seek to put confidance back in the industry why do they always highlight the negatives ( misselling, fines, having to re-train and take exams, commission, the list is endless) never the positives, now we cant advertise our achivements. I now wonder if client testamonials we may have now be ousted.

  26. Andrew,

    I’m not sure it would ever be relevant for a client to mention they made a choice based on the awards a company had won so it’s not all that surprising you’ve never seen it checking a file.

    If awards weren’t a great and effective marketing tool they wouldn’t be mentioned nearly as much as they are. I just received an email from a provider which mentioned 5 in their footer.

    I don’t disagree with you that the FSA has areas of much greater concern to focus on but not at the expense of other areas of potential consumer detriment.

  27. We received a letter from the FSA stating that in their opinion after visiting our office that we treated customers fairly. I asked if we could reproduce this letter on our website and was told in no uncertain terms that we couldn’t. Bunch of w@nkers

  28. This all has less to do with the rights and wrongs of awards and more to do with allowing BUSINESS to be BUSINESS.

    The FSA wants to wrap Joe Public up in cotton wool and get the credit for doing so. It’s socialist ideal is to be the embodiment of the state as the saviour of the public against the greed of business.

    Business needs to re-create itself (as in recreational time) and one of the ways it does this is to indulge in self-congratulatory parties at which the finest and best are paraded before their peers and given a few moments of comfort for all the months and years of slog that it took to get there.

    The regulator does the same thing – but it is hostile to business when it does so.

    We are dealing with SOCIALISM at the regulator – nothing more, nothing less. That’s why everything they do is hostile to business – SOCIALISTS are hostile to business.

    The sooner we all wake up and realise what’s going on the better. Until the socialist agenda of the FSA is changed, nothing will change.


  29. Julian Stevens 17th May 2012 at 5:05 pm

    Could it be sour grapes because the FSA doesn’t have to its name a single award of any description for regulatory excellence?

  30. Neil F Liversidge 17th May 2012 at 5:16 pm

    No danger of the FSA winning any prizes for outstanding performance!

  31. That’s a very good point Simon hopefully they will be shooting themselves in the foot. It is ridiculous!

  32. I’m interested in those firms who have won IFA of the Year, Small IFA of the Year, Pensions IFA of the Year etc etc
    Presumably when they formally declare Restricted status they will stop advertising their IFA awards successes in case clients should erroneously conclude that their adviser is Independent when he or she isn’t.

  33. Gill’s valid point highlights again, not that it’s needed, how the armchair theorists have and still are ruining the industry and making us spend as much time resolving non-issues and complaining on blogs and elsewhere that our focus is slipping.

  34. John Constable 18th May 2012 at 6:07 pm

    For my sins, I have read the part of the FSA Handbook pertaining to a financial enterprise that I am obliquely involved in.

    I recognised the fprmat straightaway, just the sort of thing that, for example, PFI or MoD contracts are constructed as … legalise.

    So, that is what IFA’s have to be, legal experts, on top of everything else.

  35. I am so gald that these overpaid bean counters are now spending their time on this. Its time to domicile in another euro country (Greece?) and sell into the UK

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