© 2016 Registered in England, company registration no 5017344 Registered address: 41 Cavalier Way, East Grinstead, West Sussex, RH19 4SE

  • LinkedIn Basic Black

November 21, 2017

January 23, 2017

Please reload

Recent Posts

A Guide to Training & Competence

December 7, 2017

1/4
Please reload

Featured Posts

A Practical Guide to Financial Promotions

 

Effective advertising will encourage clients and prospective clients to find out more about your firm and the services you offer.  However, the nature of financial products and services makes them harder to compare than those in many other markets, so consumers may be more reliant on financial promotions particularly if the consumer does not seek financial advice.  In the absence of such advice, financial promotions may be the main or only source of information that consumers base their decisions on.

This is a particular risk in the financial services sector because of the complex and often long-term nature of financial products.  Any problems with the product may not come to light for many years after the purchase.

 

The definition of a Financial Promotion in the Glossary of the FCA handbook is ‘an invitation or inducement to engage in investment activity that is communicated in the course of business’.  This is taken to mean anything that promotes the business, its services or a particular product and any communication to more than one client.

The rules covering financial promotions are in COBS 4 and Real time and non-real time financial promotions.

 

A real-time financial promotion is one during which the client has interaction with the promotion by telephone or during a meeting for example.  The FCA stipulates that to be a real-time financial promotion there has to be the facility for immediate interaction.  This means that an e-mail would be a non-real time financial promotion, likewise radio and television advertising.  Mail shots and newspaper or magazine advertising are clearly examples of non-real time financial promotions.

 

Prominence and Small Print

The FCA requires firms to give equal prominence to the benefits and the key risks of investing in a product and not hide such risks in the small print of an advert.  Firms should not ‘cheery-pick’ past performance data to show a product in a misleadingly positive light, and of course the caveat of past performance being no indication of the future should be given due prominence.  Any warnings should be appropriate and relevant to the product or service being promoted.

 

Do's

  • Ensure any fund performance data is consistent and covers at least the preceding complete 12 months and each of the preceding 5 years.

  • Ensure the source of all data is clearly identified with the name of the source and the date of publication.

  • Print the key risks of a product in the same size font and in the same colour as the benefits.

  • Avoid jargon.

  • Consider your audience and target the promotion accordingly

 

Don’ts

  • Hide key risks in the small print.

  • Cherry pick fund performance periods to show the investment in the best light.

  • Use a headline growth rate without risk warnings.

  • Fair, clear and not misleading

 

Financial Promotions must be fair, clear and not misleading the regulator will expect them to be constructed in accordance with the principles of Treating Customers Fairly (“TCF”).  Three of the regulator’s TCF consumer outcomes impact on the production of financial promotions:

 

  • products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly;

  • consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale; and

  • consumers are provided with products that perform as firms have led them to expect.

 

Compliance and Sign Off

Firms that have their own internal compliance departments have strict rules about the approval and sign-off of financial promotions.  Other firms which have outsourced their compliance have their financial promotions signed-off by that route.  Compliance Matters UK Limited offers a sign-off and approval service for financial promotions, please contact us at info@compliancematters.co.uk for more information.

Please reload

Follow Us
Please reload

Search By Tags
Please reload

Archive
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square