Technological developments and the way we communicate have understandably had a major impact on the financial services industry. Platforms and other online systems have transformed the way in which financial services are promoted, distributed, advised upon and transacted.
The increasing use of social media, as well as the way services are presented online, seeks to inform and educate as well as promote.
The challenge facing the financial services industry is adapting to this changing environment while ensuring customers have sufficient and pertinent information to make an informed decision.
The FCA’s principle seven of clear, fair and not misleading communications is as relevant today, if not even more than the past, given our desire for up to date, instantaneous information and data.
What should a firm be thinking about?
- What services are we providing and how do we communicate them?
- Are we promoting services and products or providing generic information?
- Are we providing advice or facilitating and guiding?
What is the FCA thinking about?
Quite a lot. The last few weeks have seen a number of guidance documents and consultations on the issues outlined above and the FCA is keen to engage with the industry before any negative consumer issues crystallise. The FCA recognises social media outlets are powerful channels of communication and therefore of significant value to firms and does not want to prevent their use.
However, firms are reminded any form of communication (including through social media) is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity. What does that mean? Essentially what is the purpose of a firm extolling the virtues of its services or products?
If the publicity is specific, it is likely to be a promotion and therefore needs the appropriate approach and sign-off, regardless of the media used. This is where limited character media could restrict a firm’s ability to compliantly promote its services if, for instance, certain risk warnings need to be provided as well.
These requirements are not new but are certainly under greater scrutiny from the FCA and, given the growth in execution-only offerings, again using online services and platforms, the question as to whether a firm is providing advice or information is set to recur.
What we mean by investment advice boils down to whether or not the customer is receiving a personal recommendation and that will be determined by the nature of the service being provided.
In our eyes, the more specific you become and the more information you require from a customer the more likely it is a personal recommendation is being made, so the use of social media to communicate anything other than generic information runs a risk that this approach may not meet regulatory expectations.
In any event what is the customer’s perception? As we know because we are all customers, we can be irrational and the nuances between what is advice and what is information or what is a promotion and what is simply data are probably not what we are interested in. We just need things to be “clear, fair and not misleading”.
Simon Collins is managing director of RGP Compliance
Social media compliance: At a glance
Utilising today’s technology and social media for providing services can be a distinct competitive advantage but ensure your approach to providing and comminicating your services remains clear, fair and not misleading, regardless of the medium.