Financial promotions and consumer duty

Aug 22nd '23

When it comes to your company, the way you advertise and promote your stuff is super important. It’s like the main way customers get to know your brand. Whether they’re checking out your website, seeing a post on Facebook, or scrolling through LinkedIn, these ads can really shape what people think about your products.


When you’re doing a campaign or posting stuff online, it’s super important to be fair clear and not misleading. You don’t want to trick people or confuse them with false info. That way, people can make smart choices based on what they know.


Did you know that when it comes to ads for financial services, there are some rules in place? The Financial Conduct Authority (FCA) is in charge of making sure these ads follow the rules. But guess what? There are also other groups, like the Advertising Standards Authority (ASA) and the Office of Communications (Ofcom). These guys work together with the FCA to cover things that aren’t always included in the financial services laws.


Now, here’s the cool part. The ASA and Ofcom are what we call “reactive regulators.” That means they step in when people complain about ads. On the other hand, the FCA is both reactive and proactive. They have a special team just for financial promotions, and they actively check out things like websites and newspaper articles to make sure everything is compliant.


So, next time you see an ad for financial services, remember that there are people out there making sure it’s all legit and fair. Pretty neat, huh?


Let us break it down for you so it’s super easy to understand. These are the important things you need to do to follow the rules:


  1. Make sure it’s clear that you’re promoting something related to money. You want people to know it’s about finances.
  2. Be fair, clear and not misleading. Talk about both the good things and the bad things, like risks or things that aren’t covered. It should be easy to understand, using simple words. This rule applies in a way that is appropriate and proportionate taking into account the means of communication, the information the communication is intended to convey and the nature of the client and of its business, if any.
  3. Don’t trick people! Give them all the important information they need to make a smart decision and avoid small print altogether. You want them to know everything before they decide.
  4. Make it clear who is doing the promoting. People should know who is behind the financial promotion.


Remember, following these rules will help you stay on the right track!


The FCA wants companies to talk to customers in a way that is clear, fair, and not misleading. This means that when you write, promote, or talk about something, you need to make sure it’s true and based on facts. You also need to include any warnings that are relevant.


You shouldn’t say that the products you offer are the “best” or the “cheapest” because you can’t prove that they are better than others or available to everyone. For example, the mortgage market changes a lot, with prices going up and down, new products being introduced, and rules are changed. So, something that is true today might not be true tomorrow.


If you want to use numbers or facts, you have to say where you got them from. And if you want to talk about specific mortgage products, there are rules about what you have to say. You have to tell people the interest rate, if it stays the same or changes, and how much it is as a percentage. You also have to say if there are any other charges, how much credit you can get, the representative APR, how long the agreement lasts, and more. Oh, and don’t forget to warn people that they could lose their home.


So, basically, no matter how you’re talking to people, just remember to follow the basic rules:


  • Companies should always be fair, clear and not misleading when talking to customers and never try to trick them.
  • Any post or content that talks about money could be seen as a promotion
  • Every tweet, post, or anything else put online needs to be looked at carefully and follow the rules.
  • Just like with any other promotion, companies should tell people about the benifits and risks
  • Even though we might think that social media stuff disappears quickly, the FCA says that every time companies post or tweet, it’s like making a record that stays forever. That’s why they call it “non-real time” communication.


The Consumer Duty

Testing is super important when it comes to understanding what consumers want. It builds on, and goes further, than the fair, clear and not misleading standard under Principle 7. It embodies the Duty’s outcomes‑focused approach by placing emphasis on what works in practice.


The FCA want companies to show that they understand what consumers need by testing their communication methods and making improvements if necessary. A good outcome is when consumers get the right information at the right time, and in a way that they can understand. When this happens, people will be able to make better decisions.


Companies need to make sure that their customers can easily find and understand the information they need to make good decisions. This information might include things like what customers need to do and what might happen if they don’t do it. It might also include important details about a product or service, like what it does, how much it costs, and any risks involved. Companies should also let customers know how they can get more help or information if they need it.


But here’s the thing: companies can give this information in different ways and put it in different places. Sometimes, they have to include it in certain documents, but other times, they can choose how and where to share it. So, companies should test their approach to make sure it works well with how they talk to their customers and what their customers need to know.


If companies want to make sure that customers understand important information or risks, they might need to test out some mandatory disclosures. This means checking if the disclosures actually help people understand things better. If companies find that certain disclosures aren’t working well, they can tell us and we might make changes.


The FCA has guidelines that explain different ways companies can test their disclosures and know that different companies have different abilities and resources, but they expect all companies to show that they have a good way of testing.


Companies should ask themselves if they are using the same standards to make sure their communications help customers and make sales. If they test their communications to make more sales, they should also test to make sure customers understand things well. So, companies should come up with a testing plan that works for how they talk to customers and what customers need to know.


Get advice

The rules about advertising financial stuff are super important for everyone’s safety. They’re there to protect you from risky investments and to make sure companies don’t accidentally break the law. It can be pretty confusing, so if you’re not sure if your ad follows the rules, it’s best to get it checked by an authorized company or a specialist.


You can start by reaching out to us for general advice. If you have a specific situation or case you’re unsure about, you can check out the FCA’s Handbook.


Related: Is your website is falling foul of financial promotions rules?


Need some promotional advice? If you want to understand more about how to make sure your marketing materials meet FCA standards, please click here.


About us

LS Consultancy are experts in Marketing and Compliance, and work with a range of firms to assist with improving their documents, processes and systems to mitigate any risk.


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