OpinionAug 8 2014

FCA’s outdated guidance for social media (conditions apply)

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Picture the scene.

You’re driving home on a winding country road, in the late afternoon auburn haze of a summer Sunday. Your favourite commercial radio station is playing an eclectic mix of rock anthems, which belt out of the speakers in perfect rhythmic harmony with the gentle undulation.

Absently, you are aware of the music having ended and the sonorous lilt of ‘that guy from that show’ purring over the latest model of that (probably German) car manufacturer you’ve always coveted, tempting you to dare to dream. A finance option charges zero per cent for the first four years... or something.

And then your reverie is abruptly broken. The once soothing baritone voice has accelerated alarmingly and taken on a whining pitch, babbling in tongues about “exclusions”, “terms and conditions” and all manner of other such prosaic pronouncements.

Our regulators welcome you back to reality.

Aside from the nauseatingly romantic image I’ve portrayed - it’s normally the M25, and we’re sitting in stifling heat and a miasma of fumes in an inevitable traffic jam - this experience is real.

I have heard these advertisements, without every really ‘hearing’ what is blurted at the end. That is because these staccato statements are incomprehensible: unnaturally rapid delivery, torpid subject matter, not remotely suited to the format or the audience.

This is a perfect example of the slavish compliance that is common across financial services. An almost Newtonian principle applies that demands a disclaimer for every claim; a caveat for every contention. No matter if it is intelligible, as long as it is there.

An almost Newtonian principle applies that demands a disclaimer for every claim; a caveat for every contention

I was put in mind of these perfunctory perorations this week reading through the Financial Conduct Authority’s guidance for firms using social media.

The watchdog’s concern is that firms might seek to beguile clients with the brevity and convivial informality of most social media formats. In response, it has come up with a list of practical examples of how firms should go about ensuring output is correctly qualified, limited to only the intended audience, and, ultimately, ‘safe’.

The problem is that all of this misses the point of social media, and makes it very hard for financial services firms to catch up with the rest of the world in how to use them effectively.

So, for example, if a firm wishes to talk about a specific product in a way that might constitute a ‘promotion’, it must make clear to anyone reading that is it touting its wares. The FCA suggests the hashtag #ad.

The use of a hastag, which are designed to amalgamate into a single feed content on a similar subject to encourage collective discussion, sort of suggests people might follow a thread of all financial services advertisements through social media. Expect it to start trending soon.

You must also ensure adequate risk warnings are in place, which you could do by including them prominently in your message, or in character-limited media you could choose to add an image that includes all and any relevant qualifiers.

Wait, the FCA also notes that some people on smart phones may turn off the image rendering function, and image previews do not appear on aggregation tools such as Hootsuite or Tweetdeck. Better ensure you stick to Plan A, then.

How does one differentiate a promotion from general chatter? Put simply, according to the watchdog, it is when you communicate from a business account in a way generally perceived to be “in the course” of that business that includes an “invitation or inducement to engage in financial activity”.

Even the softest push could be non-compliant: it offers the example of an Instagram message showing a triumphal chart accompanied by the line “City Shares - come and spread bet with us”.

Next to this, the same image with the tag line “City Shares - spreadbetting”, is labelled as suitable. Apparently humans are like vampires: unless you invite us in, we cannot enter and thus are safe from the temptation within.

Oh, and you probably need to invest in some software to make sure no retweets push your promotion to an audience for which it isn’t designed. The dissemination potential of social media that is probably why you’re bothering in the first place is clearly a major compliance risk.

The problem with all of this, is it is trying to apply financial promotions rules designed for a different age to a method of communication to which they are fundamentally unsuited. Just like the radio advertisement and the garbled warnings that nobody takes in.

My question is this: do we need all of these rules?

Do consumers read 140 character tweets and then sign away their life savings, or invest large sums? I very much doubt that they do, and are far more likely if anything did pique their interest to check it out more thoroughly.

Even if they did seek to do so, surely adequate “clean, fair and not misleading” disclaimers and caveats could be applied by the firm at the point of sale.

I strongly suspect people do not engage with old style advertising through Twitter, Facebook or the like. Equally, I wouldn’t like to see advisers and others so tied up in knots that they feel unable to even attempt to reach the new universe of followers such media offer.

* Exclusions apply. The value of this analysis may go down as well as up. See website for full terms and conditions.