By Ali Qassim
Oct. 3 — The U.K. Financial Conduct Authority's social media draft guidance raises questions about how to promote more complex financial products and lacks specific advice as to how companies should make risk warnings in their promotions, according to executives from U.K. advertising and direct marketing groups and social media management agencies.
However, the marketers said the FCA's recommendations on how to convey required disclosures in character-limited social media platforms should help financial services firms approach social media with greater confidence. The FCA released the draft guidance in August and is accepting comments on the proposals until Nov. 6.
The examples the draft guidance provides of good and bad practices “should certainly allay concerns about what is and isn't acceptable,” particularly for financial services firms for whom “social media has largely been off limits,” Mike Lordan, director of external affairs at the U.K.’s Direct Marketing Association told Bloomberg BNA Sept. 30.
“Marketers will find the practical information on the ‘how to’ areas useful,” Lordan said. “For instance, the FCA recommends using ‘#Ad’ on Twitter for financial promotions to make them easily identifiable for consumers.”
Richard Lindsay, legal director for the Institute of Practitioners in Advertising (IPA), the U.K.’s professional body for advertising, media and marketing communications agencies, agreed with Lordan's view that the draft guidance should “give financial services marketers confidence to use social media.”
The draft guidance “provides useful examples of compliant and noncompliant promotions and has some helpful suggestions, for example, signposting a link to more comprehensive information,” Lindsay told Bloomberg BNA Sept. 24.
He added that the FCA's recommendation on using infographics to overcome character limitations on some social media platforms is “useful, too.”
“Most financial products require a clear risk warning, which impacts the depth of content. This means that social media content may focus too heavily on a risk warning rather than promoting the financial product.”Mike Lordan, director of external affairs, U.K. Direct Marketing Association
In the guidance, the FCA suggested that the use of infographics in communications such as tweets “allows relatively unrestricted information to be conveyed,” although it added that “clearly, the image must in itself be compliant.”
Lordan questioned how easy it is in fact for financial services firms to use infographics in practice.
“Most financial products require a clear risk warning, which impacts the depth of content,” he said. “This means that social media content may focus too heavily on a risk warning rather than promoting the financial product.”
In addition, Lordan said it was unclear in the guidance “how a risk warning needs to be phrased if it is contained in the image or infographic.” He said “these are creative and compliance problems that have been left to marketers to solve.”
Lordan added that although social media is good for generating brand awareness, it is “not ideal for more complex financial promotions” and that this new guidance “doesn't aim to radically alter the picture.”
For instance, he said that “just like other FCA guidance, it doesn't provide step-by-step instructions.”
Kitty Parry, founder and chief executive officer of the Social Media Charter, which worked with the FCA in drafting the proposed guidance, dismissed the need for more specific instructions.
“It's impossible to have a ‘one size fits all’ solution, especially when retail and institutional firms are being considered” in the same draft guidance, she told Bloomberg BNA Sept. 26.
Parry added that the focus on advice around firms' behavior, rather than on a specific platform, is more appropriate “because the technology is growing so quickly,” whereas rules on behavior can “be applied to any platform.”
According to the IPA's Lindsay, “it's a classic case of advances in technology progressing far quicker than the rules, but this guidance shows that the FCA is doing its best to keep up.”
Before drawing up the final guidance, Ian Holmes-Lewis, commercial and sales director at CUNA Mutual Group Europe, said the FCA might want to reconsider placing the onus on financial firms to keep records of all social media communications.
In the draft guidance, the FCA said firms “should also keep adequate records of any significant communications. As well as helping to protect consumers, these records enable the firm to deal effectively with any subsequent claims or complaints.”
But Holmes-Lewis warned this record-keeping task could prove too burdensome for firms if they include communications sent to develop customer relations with their clients rather than purely sales communications. “This area needs more work,” Holmes-Lewis said at an Oct. 2 meeting in London to discuss compliance with the FCA.
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