The FCA’s draft guidance on the use of social media by regulated firms comes against the backdrop of concerns about cost-effective public access to advice and investment management, particularly for those of more modest means.
Having helped squeeze such consumers out of relevant markets via certain unintended consequences of RDR, the FCA is now keen to redress the balance by encouraging technology use that will enhance competition.
The FCA believes digital media can allow new, smaller firms to enter the market, avoiding bricks and mortar costs and reaching out to a wider audience. It wants to encourage such activity as part of its statutory objective to promote effective competition and hopes this will lower costs to consumers.
In this respect, the draft guidance on social media use needs to be considered alongside another guidance consultation looking at definitions of investment advice. The end game seems to be simplified or generic advice, delivering low cost outcomes relevant to consumers who have smaller amounts to invest.
A laudable aim but does it go far enough? The guidance consultation on social media is narrow in scope, addressing the issue of how the regulator will look at communications that would qualify under existing rules as regulated financial promotions. The basic message is rules are rules, however you communicate with clients or prospective clients. This presents difficulties for the use of channels such as Twitter, which includes character limitations.
Areas best practice industry guidelines might help include: corporate versus personal use, accreditation for business use, workflow tools for monitoring and recording posts, and policies regarding sharing and onward communication.
Mike Gould is senior adviser, retail distribution, at the Investment Management Association