How to use social media without breaking FSA rules

Maria Merricks reports on how advisers can use social media sites such as Facebook and Twitter without feeling the FSA’s wrath.

Twitter, Facebook, LinkedIn, blogs and iPhone apps: these words were not even in our vocabulary a few years ago, but now they play a prominent part in our everyday lives as just a fraction of the ever-increasing new media phenomenon.

Last month, Facebook hit the 500 million users mark, meaning if it was a country it would be the third largest in the world.

With this in mind, such channels are continually flaunted as vital business marketing tools, and commentator after commentator argues that the networking prospects and chances to improve knowledge and skills are just too good an opportunity for advisers to miss out on.

However, the highly regulated world of financial services has prevented many from jumping on board, and it is feared that a recent FSA report will only fuel further scepticism.

Warning

The report studied 30 adviser firms’ Twitter and Facebook pages, which offered financial advice. It also reviewed financial forums, examining posts and comments discussing insurance, investments and mortgages.

The FSA stressed that the rules of financial promotions made using new media are no different from those made using any other medium. The report found:

‘Some promotions lacked risk warnings. Other promotions, while not very specific about products or services, nevertheless went beyond the definition of ‘image advertising’. Firms may not have considered these factors to meet the definition of a financial promotion and therefore have not applied the relevant communication rules.’

‘Image advertisement’, the regulator clarifies, consists only of the firm’s name, logo, contact point and reference to the types of regulated activities provided or to its fees and commissions.

When a communication goes beyond this, it will need to comply with all relevant financial promotions rules.

Research by social networking site IFA Life suggests that advisers cannot afford to be put off social media: “Fewer than 5% of IFAs have a written down marketing plan – let alone an internet marketing plan – let alone a social media plan,” says founder Philip Calvert.

And with 100,000 Google searches per month for ‘independent financial advice’, he warns that this attitude needs to change:

“Advisers have more to fear from not using the internet as a communication tool – of which social media is a key and growing aspect. Many IFAs talk about RDR as an industry changing event, but it is the internet which will have more impact than anything else. If IFAs plan to stay in business, they have no choice but to learn how people use the internet and to develop a robust internet and social media strategy,” he says.

Key considerations

Imagine that an adviser decides to get involved. He sets up a blog and activates a Twitter page. How does he ensure he is meeting compliance requirements at all times?

Richard Smith, IFA marketing expert at theinternetconsultancy.com, believes if something needs to be said, say it: “As long as you can prove it, you can say what you like,” he says.
However, noting the serious consequences for advisers who get it wrong, Smith recommends the key consideration is to remain non-product specific:

“Imagine how you would give this advice if you were on television, or Radio 4’s ‘Money Box’, live. Of course, you wouldn’t reel off all the risks; you would deliver the advice in a generic and professional manner.”

This approach has proved sufficient for adviser Kieron Robertson, who runs online financial blog, Wealth IFA.

Robertson’s effective use of Twitter distributes financial news articles to a wider audience for ‘information purposes’ and he explains this is the key to keeping on top of compliance concerns: “Compliance isn’t really a worry to me as the FSA’s focus is on financial promotions and I keep my content generic.”

Of how to reinforce this further, he says: “Where I can, I put a disclaimer, but there’s a link to the Wealth IFA site from Twitter where I point out that these articles are not intended as advice.”

As Calvert highlights, the FSA has made it clear that it is not interested in the medium used for marketing and financial promotions, but the content of the message itself and, with this in mind, he believes IFAs have a responsibility to use common sense.

“If, for example, an IFA went on to Facebook, Twitter or LinkedIn and said ‘check out this amazing bond which guarantees 250% growth per annum’, then clearly it will be a tough one to get through compliance,” he says.

Despite this, Calvert does not believe there is cause for concern at the moment, highlighting the majority of advisers utilising social media as a business tool are doing so for all the right reasons.

He says: “Most IFAs are not doing financial promotions through social media – they are networking, sharing best practice, asking and answering questions, pointing to resources on their websites and helping consumers/followers to get to know them as people.”
Smith agrees social media is more than just a tool for advising.

However, he encourages IFAs not to get carried away with chasing new business and lose sight of the most important clients.

“RDR will really push focus onto the obligation to look after existing clients,” he says. “Facebook and Twitter are perfect for maintaining and building existing client relationships and can generate automated updates to send out with a click of a mouse,” he says.

However, he warns that an effective use of these sites will mean more than just compliance issues to keep on top of: “An adviser firm I know has a Facebook page just one click away from an employee’s profile. Fine, except the profile in question is covered with inappropriate photos from her nights out on the town,” he says.

Constant reviews are important so as not to risk the company’s reputation.

What to consider – points from the FSA

• New media may date quicker than traditional media channels, so regular reviews to ensure information is up-to-date may be required.
• Consider whether this channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used [140], which may be insufficient to provide balanced and sufficient information.
• Consider whether risk information could be displayed prominently and clearly.
• Promotions and communications made using new media must meet the requirements for stand-alone compliance.Source:  FSA’s Promotion Industry Update, June 2010