Financial services: Playing by the financial rules

Stricter regulations over the marketing of financial services are designed to protect consumers. But are they also stifling creativity, asks James Curtis.

Financial services marketers are getting rather hot under their collective starched collar, fuming at seemingly draconian regulations imposed by industry watchdog the Financial Services Authority (FSA).

Following last year's introduction of tighter rules governing the promotion of financial products, the FSA has created a 36-strong Financial Promotions department, with a formidable-sounding offshoot - the Enforcement Division.

Talk to some in the industry, and one is left with the impression that it lives up to its name, comprising a team of grim-faced regulators, willing to impound anyone quoting exaggerated APRs on savings ads.

The FSA certainly has the industry in its thrall. Its demand that financial promotions are 'clear, fair and not misleading' sounds benign enough, but the fact that it also wants advertisers to be far more blatant about communicating the risks associated with products is not so easy to swallow.

Gone are the days when these warnings could be buried in the small print.

The FSA wants this lengthy copy incorporated into the main ad, or at least presented in a way that is balanced with the main promotional message.

The body is also clamping down on one of the industry's favoured sales tools - quoting headline percentages to illustrate returns on investment or fund growth. Firms must now be extremely careful when quoting numbers, especially if they are based on unrealistic assumptions not mentioned in the promotion. Selling investments based on headline numbers of 'past performance' is also a grey area, instilling nervousness in marketers about what they can say.

Many advertisers argue that the rules are stifling financial marketing.

Lucian Camp, chairman of CCHM:Ping, a financial services agency whose clients include Nationwide and American Express, says the FSA's rules are unworkable. 'Advertisers are having to buy twice as much space just so that half of it can contain negative messages about products,' he says.

'The FSA would be happy to see that happen, but it won't. What will happen is that companies won't advertise at all.'

Spending slump

Camp says the volume of personal finance ads, particularly those concerning investment, inevitably declined after the stock market dives of 2001 and 2002. Now that investor confidence is returning, advertising levels should be rising. Instead, believes Camp, FSA rule changes are keeping adspend down.

He argues that financial services advertising plays a crucial role in filling the UK's savings gap. If firms are deterred from selling their products, he argues, the FSA will, albeit unwittingly, make the problem worse. 'If advertisers give the prominence to risk that the FSA wants, mass-market consumers will be scared off. Does the FSA want them to invest in long-term savings? If it does, this regime will make it impossible to achieve.'

Allegran Advertising, an online media agency with financial clients such as MBNA and Virgin, says the tighter rules are having a dramatic effect.

Ray Witter, sales and marketing director, claims clients are reporting a 10%-25% drop in response rates, and that the agency's income from regular financial clients has fallen by 30% over the past three months.

The FSA counters that it is merely protecting consumers, and has no agenda to stifle marketing. 'Financial promotions are an area of great concern to us, because it is an area of such high risk to consumers. An unrealistic impression gained from a promotion can be extremely dangerous, especially with a high-risk investment. A firm should be able to market its products, but never at the expense of consumer protection,' says senior spokesman David Whitely.

'We are not being unreasonable. We are just saying anything that mentions a potential return should be balanced by a mention of the potential risk. We understand marketing is about persuasion, we just want it to be the right kind of persuasion.'

In fact, since it beefed up its resources to investigate and castigate financial advertisers in April 2004, the FSA has hardly been imposing a prodigious number of fines. Although it has investigated about 400 cases, it has pursued just 60, with most resulting in a private warning. Only six companies have been fined, most notably AXA Sun Life, which received a £500,000 penalty for including misleading statements in a campaign that ran between 2002 and 2004 (see panel below). This penalty was by far the biggest; the others ranged from £35,000 to £70,000, with the transgressors including Cantor Index and City Index.

So what has been the effect of the FSA's tougher stance? At first glance, data supplied by Nielsen does not paint a picture of financial services advertisers running away in panic. Although some observers claim radio has been particularly badly affected due to advertisers having been deterred by lengthy 'wealth warnings' requirements, the figures do not support this view.

Between November 2004 and March 2005, which covers the period since the new regulations came into force, radio spend by financial advertisers rose 17.6% year on year, with their spend on all media up by 1.5%. Some sectors have, admittedly, drastically cut radio spend, such as unit trusts (down 100%), but others, such as pensions and plastic cards, have hiked it by more than 200%.

Positive effect

Lynne Springett, marketplace and PR manager for the Radio Advertising Bureau, argues that the FSA rules have, if anything, made advertising on radio easier. 'The changes have not had a detrimental effect. In fact, some of the requirements have been simplified,' she says. 'In many cases complex wealth warnings are not required and we have been working with advertisers to help them understand what they do need and, more importantly, don't need, to include in their radio ads.'

Online advertising by financial brands has not been overly affected either, according to Nielsen//NetRatings. There were 142 web campaigns for investment products in April 2005, up from 76 in April 2003. Campaigns for loans and mortgages have remained stable, although there were half as many credit card campaigns in April 2005 compared with April 2003.

Press ads, which one might assume would have been hit hard because of the extra space needed for the inclusion of risk warnings, have not been obviously affected. Adspend for general investment schemes has either stayed stable or increased, according to Nielsen. In March 2005, £3.8m was spent on investment press ads, compared with £1.9m for the same month in 2004.

However, there is some evidence that direct mail has been affected. Personal loan brands spent £14.6m on the medium in March 2004, according to Nielsen Media Research, compared with £8m in March of this year. Spend on current account products and ISAs also fell sharply.

Jim Spencer, an account director at OgilvyOne, which works with American Express, does not think direct mail need suffer as a result of the regulations.

Indeed, he feels the medium can do more than any other to put forward the kind of balanced view the FSA wants to see. 'It has always been left to direct mail in the financial services sector to be the carrier of extra, more detailed information,' he says.

Lack of concern

It is interesting that the loudest complaints about the FSA's tougher stance on financial promotions have not come from advertisers themselves, as some view the grievances being expressed about the regulatory regime as unfounded.

Rob Page, marketing director of New Star Investment Funds, agrees that many fund management companies are advertising less, but not as a result of FSA rules. 'Some have used (the FSA regulations) as a convenient excuse not to advertise. The truth is that we are in a very difficult market for mutual fund sales, and they don't really want to advertise.This situation has more to do with the precarious nature of mid-size fund-management companies' bottom lines.'

Page point outs that New Star has consistently increased its adspend since launching in 2001 and has not been deterred by the FSA. 'Financial ads may be more boring than five years ago, but, in all honesty, they are far more balanced and responsible.'

Another major financial advertiser, Fidelity Investments, is similarly unfazed. Head of marketing Sarah Speake says the rules may require agencies and clients to think more creatively about how to communicate their messages, but that does not mean they will market their products any less. 'There may be more work to do from a creative point of view, such as highlighting the benefits of long-term investment and not leading on obvious performance, but that has certainly not influenced Fidelity's decision on how much to spend on marketing,' she says. 'We are still hugely committed to it. We may have changed our primary messages, but not our attitudes to marketing.'

Speake adds that the rules are helpful for advertisers. 'It has brought consistency and clarity, which from the consumer's point of view, is far better.' She agrees with Page that a cautious stock market has more to do with the drop-off in financial advertising, especially for the kind of off-the-page direct-sell press ads that used to be so common.

This is a period of transition. Tougher regulation and rule changes always take time to bed down, and agencies and clients are working hard to adjust.

Given the mis-selling scandals of the past, few can argue that better protection for consumers is not needed. On the other hand, the FSA may believe it is realistic about how firms can advertise products, but can it expect them to stick to its mantra of 'balanced advertising'?

CCHM:Ping's Camp does not believe so. 'Advertising is not a balanced form of communication,' he says. 'It is partisan and persuasive. Advertising should tell the truth, and nothing but the truth; but if it tells the whole truth, it is not advertising.'



The FSA slapped a record £500,000 fine on AXA Sun Life in December 2004 for a campaign backing its with-profits endowment assurance policy, the Bonus Cash Builder Plus Plan (BCB) and a life policy, the Guaranteed Over 50 Plan (GO50). The ads, featuring Carol Smillie and June Whitfield, ran between February 2002 and January 2004. The BCB ads contained inaccurate data in a chart comparing its benefits with a building society account. AXA discovered the error in April 2003 and rectified it, but failed to notify the FSA until November 2003. The FSA criticised AXA for not giving enough information on how the policies worked. It also said the ads focused on the benefits, not the risks.


Spread-betting firm Cantor Index ran a campaign in 2004 across TV, press, posters and flyers, all of which prominently promised a 'Free Xda' handheld PC to people who signed up to its Cantor Mobile spread-betting service. The device, which was being offered in a tie-up with O2, was a tantalising incentive. The FSA regarded it as being dangerously so, especially for less experienced investors who might not have been aware of the risks of spread betting. Cantor Index was fined £70,000 for the misdemeanour.


In January 2005, the FSA fined investments firm Hemscott £50,000 for a promotion using the strapline 'We even make a bear market all soft & cuddly'. The FSA took issue with the execution, which featured a photo of a child cuddling a bear, for failing to present a balanced view of the risks entailed in playing the financial markets. The promotion was also castigated for mentioning only selective investment recommendations that had been made by the firm in the past, thus giving a distorted view of its track record.


In March, the FSA fined share-tipping company Highbury Financial Services £35,000 for the publication of a promotion under the dubious tagline 'The 25 shares most likely to double in 2004'. The national press campaign failed to make clear mention of the risks involved in share dealing and also included false statements about the share tips, claiming that they were supported by information from 'a panel of financial experts' and 'secret tip-offs'.


1. Clarity of product: Financial promotions should indicate clearly what the product or service is. It should be described in a way that is meaningful and relevant to the customer. It is not necessary to use technical terms, which many customers may not understand anyway.

2. Risk warnings: Promotions should carry a description of associated risks with sufficient prominence, not buried in the small print. Just because a firm considers a risk to be the industry standard and the FSA has not taken action before does not mean it is compliant.

3. Percentages and headline claims: Unrealistic and misleading headline figures should be avoided. Those showing a prominent possible return should, where relevant, clearly identify that this may be achieved over the period of the investment, not annually.

4. Misleading statements: Statements should not mislead the customer. Headlines and statements are part of the marketing message but sometimes play on misconceptions, which, once established, are hard to dispel.

5. Charges and early redemption penalties: Promotions must provide a balanced, fair and adequate description of the investment, commitment and risks. To ensure this standard is met, firms should consider the extent to which information about charges and early redemption penalties should be described, and the degree of prominence.


Category Apr Feb Oct Aug Apr Apr

05 05 04 04 04 03

Credit card Campaigns 30 40 46 67 56 57

Advertisers 19 19 24 26 24 23

Investments Campaigns 142 122 119 95 154 76

Advertisers 65 60 60 54 61 50

Loans Campaigns 124 99 150 121 123 128

Advertisers 71 58 83 68 78 82

Mortgages Campaigns 54 51 85 69 52 59

Advertisers 20 33 43 39 36 34

Source: Nielsen//NetRatings




Total Yr/yr

(pounds) chng (%)

Insurance (other) 80,471,298 37.2

Personal loans 38,929,422 -11.6

Plastic cards 35,236,528 -6.3

Mortgages & related products 34,299,141 46.2

Financial services (other) 24,966,527 0.8

Finance corporate 19,183,324 -17.8

General banking services 16,942,233 23.3

Savings accounts 15,012,868 26.2

General investment schemes 10,986,754 -14.4

Life insurance 7,441,048 -20.6

Current account* 6,810,783 -28.8

Packaged accounts 6,340,637 -18.3

Company notices & announcements 5,642,726 10.5

Monthly plans 5,450,473 57.8

Business banking services 5,202,768 -42.0

Unit & other trusts 4,242,368 -18.4

ISAs (Investment savings accounts) 4,135,900 -55.3

Asset management 3,373,352 -54.2

Finance sponsorship 2,261,662 13.9

Bonds 2,051,622 -36.8

Pensions 1,648,628 7.3

General financial 455,689 -37.4

Interest rate announcements 288,945 -86.9

PEPs (Personal equity plans) 195,605 243.4

Business finance & loans 186,049 -74.6

Annuities 11,976 -56.3

Total 331,768,326 1.5

Source: Nielsen Media Research Multimedia System for the period Nov

04-Mar 05

*Includes high-interest current accounts


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