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The FCA’s recently published guidance on financial promotions on social media has potentially profound consequences for financial firms’ marketing strategies. The guidance clarifies the FCA’s expectations on how financial promotions should be communicated on social media by financial firms and their marketing affiliates, such as influencers. It follows detailed consultation with firms in 2023 about concerns that poor quality promotions on social media can lead to consumer harm. A particular concern was the trust young consumers place in the information provided by influencers.

The updated guidance does not create new rules or penalties on firms promoting financial products or services on social media. The focus of the guidance is to show how they should comply with the FCA’s existing rules and policies. It reiterates that financial advertising across social media channels must be fair, clear, and not misleading to enable consumers to make informed decisions appropriate to their requirements. They must provide a balanced view of benefits and risks and carry appropriate risk warnings.

The FCA stresses that any online promotion must be lawful, and it will take action against anyone promoting financial products illegally.  Lucy Castledine, the FCA’s Director of Consumer Investments, said: ‘Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.’ The FCA means business: increased scrutiny of adverts led to over 10,000 misleading adverts being removed in 2023, an increase from around 8,500 the previous year.

In this blog, we will look at the key points of the guidance and considerations for marketers.

Consumer duty

The FCA wants financial firms to consider the guidance alongside their consumer duty obligations, which focuses on delivering good outcomes for customers. Consumers must be alert to questionable adverts and online scams, but financial promotions must aid their understanding by communicating information in a way that supports efficient decision-making.

To achieve this, firms must pay particular attention to key factors in their promotions. These include their target audience, what recipients need to know, the decisions recipients will make, and where confusion could arise. The FCA warns that promotions that don’t meet its standards can cause consumers to buy inappropriate products, resulting in poor outcomes.

Social media influencers

The guidance stresses that firms are responsible for the compliance of every promotion they make or ‘cause to be made’. This can make them responsible for content made and shared by their affiliate marketers, if deemed to be a financial promotion, even if the firm did not create or generate the original content.

This is a clear warning that unauthorised persons, including influencers and other affiliate marketers, must communicate with their followers in the right way. If they promote a financial product without approval from an FCA-authorised person with the right permissions, they may be committing a criminal offence. The FCA recommends that influencers consider the effect on their reputations if they are found to be illegally promoting financial products and services.

Memes, reels, and gaming streams are specifically included in the guidance. This demonstrates that any form of communication is potentially a financial promotion if it includes an invitation or inducement to enter into investment activity. It signifies the FCA recognises the role ‘finfluencers’ can play in this.

The guidance seeks to address how the growing popularity of finfluencers can affect the financial decision-making of their followers and fans through recommendations or promotions. It recognises that many people, especially younger consumers, make extensive use of social media when researching investment products. Social media can provide accurate and clear information to help. There is, however, a significant risk of finfluencers spreading misinformation and encouraging high-risk behaviour, potentially leading to consumer harm.

It is, therefore, imperative that financial marketers have full control over the creation, production, and distribution of their online content.

Impact on marketing

The FCA recognises that social media is a central component of financial firms’ marketing strategies. It is an effective channel for reaching a large audience with speed and efficiency. The guidance, however, reminds firms they must align their marketing strategies with acting to deliver good outcomes for retail consumers.

This is particularly critical in the content and presentation of financial promotions. Content must be tailored to the target market to increase its likelihood of understanding. Marketers must provide a balanced view of benefits and risks in every promotion. The complexity of some financial products and the requirements of some audiences may necessitate a significant level of detail to ensure these requirements are achieved.

The presentation of specific information, such as risk warnings, requires attention to detail. Risk warnings are important for consumer understanding and must be displayed prominently. This can impact the design of a promotion. The prescribed risk warnings in promotions for high-risk investments ‘should be displayed throughout the promotion and not be obscured or truncated by a design feature of the social media platform.’

The FCA’s increased scrutiny of financial promotions places greater responsibility on marketers to get content and presentation right. The only sure way of doing this is by the review and approval of promotions by marketing and compliance specialists.

Systems with review and approval mechanisms are critical for controlling and managing how promotions are used on social media. They enable firms to take ‘proactive’ responsibility for how their affiliates communicate financial promotions. Approved content can be made available for affiliates to use. Content produced by affiliates must be approved before they can use it, thereby preventing them from communicating illegal or non-compliant promotions.

Training will help affiliate marketers understand their responsibilities and other guidance relating to their activities. Monitoring and oversight can be achieved by deploying an efficient marketing system that combines artwork templates  and approval workflows. Such a solution will ensure the accuracy and compliance of content, including content shared by affiliates, across every marketing channel, including social media. Restricting the use of approved content reduces the risk of breaching FCA regulations.

Perivan’s workflow approval platform streamlines regulatory compliance processes by providing a centralised hub for document creation, collaboration, and approval, ensuring efficiency and compliance in financial services. Workflow tools ensure all content is approved before it is used, and an audit trail is automatically captured to ensure compliance with FCA regulations.