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FSA warns over “risk sandwiches” in promotions

New FSA guidance on financial promotions warns adverts should not separate out the risks and benefits of a product or focus purely on headline charges.

The guidance sets out what the regulator expects of adverts for Isas and investment professionals as well as fund performance. It says they should be fair, clear and not misleading.

The guidance warns against “serving up a risk sandwich” by separating out information on the benefits and risks of a product. It also says promotions should not just focus on headline charges, especially if they are likely to change.

It says: “If you are advertising a fund that invests overseas, for example, you could talk about the currency risk at the same time as introducing the overseas feature of the fund. Be careful not to diminish or obscure important
statements or warnings.

“If the promotion refers to charges does it fairly represent these?”

Isa promotions should make clear how money will be invested and properly describe any tax implications and interest rate conditions.

Promotional material covering fund performance must have standardised information so consumers can effectively compare it with other funds. Other performance related information can be included but it must not “be the most prominent part of the advert”.

Anyone referred to as an investment professional in promotional material must be an authorised person or an exempt person for the relevant controlled activity or someone else who carries out the controlled activity for the firm.

What the FSA describes as “image adverts” will be exempt from the rules, though they will still need to be clear, fair and not misleading. An image advert must only include the name, logo or other image associated with the firm, contact details and reference to the type of regulated activities provided by the firm.

It says: “Research shows consumers tend to shy away from something they do not understand. This is another reason why you should consider your target audience, and aim your promotions carefully, considering your content and what channel you use. And finally, always consider, from the customer’s point of view, whether your advert is fair, clear and not misleading.”


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. What on earth is a risk sandwich?

  2. Arrange these words in the correct order;

    10 out of 10 for recycling……the usual rubbish

  3. “Research shows consumers tend to shy away from something they do not understand.”

    They also shy away from something too complicated, too full of acronyms and jargon (which any discussion on performance, costs, charges and taxation must inevitably include) and that requires close inspection and analysis.

    Obviously, the author of this knows nothing of advertising and marketing.

    A properly constructed advertisement should sell the sizzle, not the sausage.

    You might as well publish the KFD as well, while you’re at it. Most of it appears now to be mandatory.

    If I’m buying a car, my interest is drawn by the picture on the page, not the comparitive price of another manufacture’s product, not the mpg, nor the servicing interval or the rate of reported breakdowns within 12 months of purchase. It’s the glossy bit that invites me to ask those questions.

    It will surely deter all but the biggest (like, errr…Banks) from making product representations to a potential client base.

    Or maybe that’s the idea?
    No, surely not…………….

    Roll on retirement!

  4. For one moment I thought the subject was crisp sandwiches, I like salt and vinegar or cheese and onion butties.

    The regulators have on the magic mushroom pie or the wacky backy tarts again… when will they ever learn? It messes up their train of thought, whatever it is on a given day.

  5. A risk sandwish is a marketing ploy. It follows the same basis as giving bad news of poor feedback to someone:

    1. Provide a benefit of the product (or some marketing puff)
    2. State the risk
    3. Provide a benefit of the product (or some marketing puff)
    4. Hope the customer doesn’t notice the risk, or hope that the nature of the risk is underwhelming.

    It’s an FSA note to marketing, and the poor sod that signs off promotions to remind themselves of what is clear, fair and not misleading.

    Now you know what a risk sandwich is, look out for it in bank material relating to their products!

  6. Even more Bemused 2nd April 2012 at 12:35 pm

    So a sandwich apparently is created by stating advantages then disadvanatges and then concluding why you are recommending the investment. If the conclusion was not to recommend it, what is the point of the advetisement, and why is it a bad thing if the risks are made clear?

    The FSA are suggesting that advantages and disadvantages should be bundled together, but surely in some circumstances this is less clear than separating the risks into easily digested bullet points?.

    Are they also banning tortilla wraps?

  7. @chris miller. If this is all so obvious, why do most of the financial promotions I see at draft stage contravene the FSA rules? ‘Clear, fair and not misleading’ appears to be viewed by some as an impingement to their right to flog product!

  8. Whether it is a bad thing depends on what the risk is (and the product, and the target market, etc etc)

    In the main (but by no means all the time), a standard customer can more readily weigh up the advantages and disadvantages that apply to their own circumstances if they are bundled. Equally, for certain customer or certain products, the risks may be better bundled. However, this would normally be where something is either and advantage or a disadvantage, depending on the customer circumstance, as opposed to something that is generally a disadvantage for most customers.

    In the main (but by no means all the time), a sneaky marketing department wouldn’t dream of trying to under play the risks by hiding them in a bunch of woolly nonsense.

  9. @ Dathan
    How is it you manage to see them at draft stage?

  10. Lindsay Bateman 2nd April 2012 at 3:25 pm

    Let’s not overlook the thousands of investors globally who trusted banks when they sold structured products as “100% principal protected on maturity” . How many banks made it clear in their product literature who the counterparty was – and what their obligations would be if their selected counterparty failed? Clear, fair & not misleading?…not in all cases. Ask the investors still having to resort to litigation for repayment of their savings about clear, fair & not misleading product literature…

  11. Risk sandwich?

    Once told, life is like a s**t sandwich, the more bread you have the less s**t you taste.

    Sounds like the FSA and it’s our bread! Weren’t they supposed to be disbanded and then comeback to life again with just more of the same cronies jumping on the Compliance bandwagon into Executive roles in the Square Mile?

  12. What a lot of nonsense.

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