Technology affords companies and consumers the ability to share information and make educated decisions. The UK financial market is no exception and as firms begin to leverage online platforms, they will do well to understand social media regulation.
Regulations that seek to improve the transparency and accuracy of financial advice provided on social media platforms is a key focus area for the Financial Conduct Authority (FCA). In fact, MiFID II legislation – which the FCA plans to implement despite the UK’s decision to leave the EU – aims to improve communication within the financial market and the regulations that constitute each type of communication. With MiFID II scheduled to come into effect in January 2018, the FCA continues to review guidance for consumer communication.
In October 2016 the FCA published the feedback statement on its Smarter Consumer Communications discussion paper. The paper, published in 2015, highlights the role that communications play in empowering consumers to make informed decisions about their finances and the advice they receive from professionals. In the feedback, respondents voiced concern over the FCA’s stance on social media.
According to FCA guidelines, financial promotions must be standalone and when a piece of social media content is deemed promotional, the FCA holds it to the same compliance regulations as a television advertisement or website. In other words, a promotion on social media must be incompatible with ‘click-through’; the whole marketing message, any background information, as well as legal notices or risk warnings must fit within a single piece of content.
When it comes to social media, however, firms may find communicating through these platforms to be limiting. Many social media are designed to provide the viewer with concise information delivered in as few words (or in the case of Twitter, characters) as possible. Content published on social media often provides a link to more information and can be the first step in a purchasing process.
The FCA does recognize social media as a powerful tool for improving consumer understanding of financial services and as such, encourages firms to make improved communication with consumers a priority. In response to feedback, the FCA also recognizes that standalone compliance may restrict the use of social media. Despite this, the FCA has not announced plans to amend its stance on social media.
Firms operating within the financial services space know that regulatory changes will continue as customer demand and innovations evolve. While current social media guidelines may inhibit some content, firms should continue to integrate online platforms into their communication strategies. Our 2016 Retail Banking Insight Survey shows that over half of customers use online platforms to carry out investment-related activities.
While the FCA’s guidelines may appear restrictive, firms that publish content that is both compliant and creative will resonate well with audiences. For example, when using character-limited media such as Twitter, an image can often help communicate a message without an extensive amount of text.
At the same time, communication should not be limited to just online channels, as resonating with a range of audiences will require offline efforts. For example, our data also shows that the use of other channels such as face-to-face, email, and telephone remains prevalent among consumers. To ensure messages resonate with a range of audiences, advisors will do well to maximize potential across these channels.
By Nicole Douglas, Wealth Management Analyst