The Financial Conduct Authority will focus more on the way firms promote services and products to consumers.
A promotion will usually be the consumer’s first engagement with a firm. It is a bit like a shop window – first you look at the promotions in the window before you go in but when you enter the shop you find it comes with several conditions. No doubt, you are disappointed and less likely to visit again. It is no different for financial services and we want firms to promote products in which consumers can have complete confidence.
Financial promotions are changing and we are seeing a lot more on Twitter. The regulator does not have an issue with firms using Twitter but, with only 140 characters available, firms must think carefully if they can meet FSA rules. If there is not enough space for a risk warning or key information, it will not be a suitable marketing vehicle. Put yourself in the consumer’s shoes and ask yourself if the promotion tells you everything you need to know.
But I do not want to focus on the bad as we have seen lots of good promotions that know their target audience. In 2011, we asked firms to consider the prominence of key information, position of text, background, colour and type size in print promotions. There has been a marked improvement.
Firms have also started to think about consumers’ online activity. By providing the right balance of information and a logical journey through the website, consumers are made aware of the key benefits and risks. But there is still work to do. In 2011, we amended or withdrew more than 300 financial promotions, up from 260 in 2010.
New powers are being debated in Parliament that would allow the FCA to ban promotions if deemed unfair, unclear and misleading. It could also publicise the action. Another potential power will allow earlier intervention in the product life cycle, meaning all aspects of the product chain will be actively regulated – design, development and management.
Assuming these powers are granted, the FCA will be able to take faster and more effective action from day one, meaning when it asks a firm to amend or withdraw a promotion, it will be expected to do so promptly.
If a firm disagrees with the regulator, it will be able to contest the decision. The FCA will consider the argument and respond with a final decision but if it stands by its initial decision, the details may be published.
The FCA will focus on consumers and expects firms to do the same. There must be clear promotions to allow consumers to make an inf ormed choice based on the knowledge that a product will do what it says on the tin, with a knock-on effect of a more competitive industry.
Clive Gordon is head of conduct specialists at the FSA