DEFINING FINANCIAL PROMOTIONS

Ask a room full of compliance professionals what constitutes a financial promotion and you are likely to receive several different answers. It’s not that we don’t all know the rules, but some would have stricter requirements than others.

Why? Because we all come at compliance from different angles. Networks are responsible for the advice given by their affiliate financial planners and to limit risk, they often expect them to operate to higher standards than the FCA dictates. You’re likely to get nothing more than generic instruction from the behemoths that dominate our industry because they don’t know clients well enough, whereas we work closely with firms and will tailor our advice according to their needs.

The regulator might be the body that sets the financial promotion rules, but it is actually the Financial Services and Markets Act 2000 that provides the definition. It is: “An invitation or inducement to engage in investment activity, communicated by a person in the course of business.”

Whilst many compliance professionals focus on the ‘invitation or inducement’ aspect of this definition, here at B-Compliant, we are more interested in the latter part of the sentence. We believe the ‘communication’ element is the key to understanding what could constitute a promotion.

To underline why we think this is the right approach, just consider the name of the rule book, COBS 4: Communicating with clients, including financial promotions – the ‘promotions’ bit is an afterthought.

Forget promotions, think communications

We deem any communication you have with a client, up to the point of investment, as a financial promotion, including suitability reports. These are already subject to close scrutiny, so why wouldn’t you give the same treatment to the more traditional forms of promotion?

Your website, blogs, newsletters, adverts, social media posts, presentations and mailings should all be reviewed for suitability and relevance. You don’t need to be referencing investing or a particular product specifically. Any promotion of a financial advisory or wealth management firm or the service it offers could be regarded as an inducement to invest, as investment advice makes up the core element of your business.

We find clients are often reticent to label something as a promotion. However, if you have any doubts, there is no harm in adding it to the register. You will never be penalised for being overly cautious, but you could fall foul of the rules if you fail to correctly identify a promotion.

Regular reviews

Reviewing and approving financial promotions is not a one-time-only task. It should be something you look at regularly to ensure your communications remain up to date.

The frequency with which you need to review material will depend on the type of promotion, how easily it can be shared, for example, via social media and the content – is it time sensitive or could it change?

If you deem a promotion to be out of date, it should be removed or revised. Adding a disclaimer to the tune of ‘the information was correct at the time of publication’ is a cheat’s way out and doesn’t excuse very old blogs being left on your website. It is best practise to review promotions regularly and/or set an expiry date.

Let’s assume you’ve written a blog about capital gains tax. The limits have changed dramatically in recent years, so the information within it could be obsolete. Publishing blogs on your website opens up your knowledge and expertise to the general public, who don’t have the benefit of your advice and you don’t want them making a decision based on information that is no longer accurate. This is why promotions, whether they mention investments specifically or not, need to be clear, fair and not misleading.

Social media is a minefield and we could write another blog solely on this subject, but if you have employees who are posting in their guise as a financial planner, you should be carrying out regular checks on their content at the very least.

Regulatory obligations

Just as you would assess a client’s investment to ensure it remains suitable, you need to do the same with your promotions. Where there is explicit reference to taxation, or anything that could change over time, such as investment performance, we would expect to see a risk warning as a minimum and reviews undertaken at least annually.

Don’t forget to consider Consumer Duty too! The financial promotions rules are still there in the background, but the duty brought about higher standards, particularly in relation to a firm’s communications and client understanding. To meet your regulatory requirements, you should review all of your communication regularly, not just those that fit into the traditional definition of a promotion. This is the best way to ensure good outcomes for customers.

Ultimately, the financial promotions rules are not black and white. Much of what is written is done so as ‘guidance’ and as the variation in compliance requirements demonstrates, the advice you receive will depend on the way it is interpreted.

If you would like to know more about the rules relating to financial promotions, or you need help reviewing your communications, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk