Financial promotions and product literature

A financial promotion is a publication used to attract customers into buying products. Whilst the temptation may be to make those as appealing as possible, they should always be clear, fair and not misleading.

This is a regulatory requirement, and extends also to any product literature (such as a summary of cover), correspondence (such as a renewal letter) or contractual documentation (such as the policy document) that’s sent to customers.

What is a financial promotion?

It could be any of the following:

  • Television advert
  • Radio advert
  • Static image advertising
  • Web or social media advertising

What does this mean in practice? Marketing must be:

Clear – Clear promotions are those which have been made easy to perceive, understand or interpret. You have avoided the use of jargon and diverted a customer’s attention to key information by giving it more prominence.

Fair – Often financial promotions will make claims about how good service is. You need to ensure that such claims can be substantiated and that they will not result in misleading the customer. Failure to do so would mean your financial promotion is not fairly positioned.

Not misleading – If something is neither clear, nor fair, it is likely to materially mislead a customer into making a purchasing decision or using your service. This decision may not be in their best interests and as such they may end up with a product that does not satisfy their demands and needs. This would cause consumer harm and therefore be poor conduct.

Steps the FCA can take when they find a misleading financial promotion

When the FCA finds that a financial promotion is misleading they can take any of the following actions:

  • Ask the firm to change or remove the advert
  • Ask the firm to write to customers who may have been misled
  • Warn or fine the firm
  • Ban the promotion

When publications are not clear, fair and not misleading

Recently, Lloyds Bank General Insurance Limited (LBGI) were fined for failing to ensure their customer renewal notices contained information that was clear, fair and not misleading. LGBI were informing their customers that they were receiving a competitive price but were unable to substantiate this claim. The FCA found LGBI to be in breach of the principle to pay due regard to the information needs of their client and communicate information in a way which is fair, clear and not misleading.

Lloyd’s were fined £90m and required to contact all affected customers to put things right, making compensation payments where necessary. At the time of the ruling, they had paid £13.5m in compensation to those customers affected.

The Advertising Standards Authority

The Advertising Standards Authority (ASA) is the UK’s independent regulator of advertising across all media. They apply the Advertising Codes, which are written by the Committees of Advertising Practice (CAP).

The CAP code is a list of rules you should also be aware of when writing adverts. The ASA will make rulings against firms who are in breach of the CAP code. This ruling, against, alleges that they misled customers by making an unsubstantiated claim that they were number 1 for car savings. As were unable to substantiate their claim, across multiple adverts, they were required to remove the adverts in their current format.

Questions to ask yourself

  • Do you have a clear and well-understood process around creating financial promotions and other product literature? Is it followed?
  • If you make claims about the quality of your products/service, are these factually accurate? If so, can you substantiate these claims? Do you keep an audit trial of that? Do you regularly check the claims remain accurate over time? Do you document this in a clear and accessible way?
  • In order to help your customers make informed decisions, have you drawn sufficient attention to any key limitations or exclusions? Do you test this with your customers?
  • Do you have a control which reviews legacy content to ensure it remains relevant?