The Financial Conduct Authority (FCA) has released its long-awaited guidance on financial promotions in social media, which it ran a consultation on last year. I’m glad to see that the publication of the guidance comes with the caveat that:“The FCA recognises that social media are powerful channels of communication which are of significant value to firms and do not want to prevent their use. The guidance is designed to assist firms in their use of social media and ensure that they are compliant with the FCA’s financial promotion requirements.”
The guidance is part of the FCA’s strategy to improve customer engagement and ensure that consumers are treated fairly and not misled. Until now, the heavily regulated sector has been understandably cautious towards social media, particularly inengaging with all-powerful customers.
When it comes to the promotion of financial products and services, social media is a bit of minefield and firms need to be incredibly careful that they don’t breach any rules around ensuring that customers have all the necessary information. 140 character tweets go out to a global audience and can be shared by anyone – so how do firms protect themselves and their customers without missing out on the benefits of using social media to improve the customer relationship?
Signposting further information
Complex financial information cannot easily be included in character-limited social media updates so signposting to further information including all the necessary risk warnings is a solution. But the guidance states that the original update has to be compliant in itself. Still difficult territory. So should firms be discouraged? The guidance does provide more detail on exactly how to get around this with infographics but there isn’t muchmention of blogging, which seems the obvious typeof long formsocial content for financial services firms to employ.
A major benefit of social media for businesses in other sectors is the ability to identify and target customers whose data they would otherwise not have access to (although it’s important from a reputational and ethical point of view that any business is careful in doing this). However, the FCA reminds financial services firms that the same rules apply to social media as they do to ‘cold calling’ in relation tofinancial products and services.
Keeping an audit trail
They say social media content is never ‘yesterday’s news’ as it can hang around forever, but firms shouldn’t rely on this. Capturing content, conversations and data using robust software is important. The FCA also suggests that there is an approval process in place for all content shared, which takes away from the ‘immediate’ nature of social media but could work as long as the compliance team are bought into social media and flexible to its uses.
Avoiding promoting all together
The FCA’s guidance on social media specifically relates to regulation of ‘financial promotions’, which involves “an invitation or inducement to engage in financial activity”. There are plenty of ways that firms can use social media to build trust and credibility and demonstrate their expertise by being useful rather than salesy – which, after all, is what social media is all about. As long as the content cannot be deemed as providing financial advice, mis-selling or promoting a certain type of product or service, firms can communicate with consumers very effectively. The key to this is having a strong content marketing strategy in place which ensures a regular stream of pre-approved, high quality thought leadership content tied into topical issues and key dates which can be shared via multiple channels and in a range of formats to maximise its visibility and reach.
The FCA’s guidance may scare many financial services firms off social media all together but for those that really care about consumers, there’s an opportunity to change the face of customer engagement in the financial services sector within the existing regulatory framework.