The Financial Services Authority (FSA) has carried out a review of the financial promotions of property as an investment following concerns raised about inadequate descriptions and a lack of consumer understanding.
While full details of the review are not yet known, Tony Katz, manager of the financial promotions team at the FSA, told delegates at the Direct Marketing Association’s (DMA) Financial Services Conference many promotions do not give an adequate description of the investment and do not pay enough attention to the risks involved.
More specifically, Katz says many consumers are confused about the distinction between investing in commercial property and investing in residential property, as there is often a lack of clarity about the different risks involved.
Following the research, the FSA will announce the results of a review into financial services direct mail, as Katz says this medium can be very influential and may be the only material consumers see before making a purchase.
The regulator will also produce a discussion paper on the distribution of responsibilities between IFAs and providers in making financial promotions, as part of a wider review into the relationship between the two groups.
But while the regulator will continue to conduct reviews and present case studies to aid firms in designing financial promotions, Katz says it will take a principles-based approach to promotions by assessing whether firms have treated their customers fairly.
He adds: “In an ideal world we would sign off on all promotions, but in reality it is not black and white that promotions need, say, five bits of information. It is a process that needs to be gone through by each firm, but if firms have a genuine misunderstanding there is no reason why they cannot ask us for further assistance.”
Rather than saying a promotion is compliant, the regulator will suggest the key factors firms need to take into account depending on the product’s level of risk and the consumers who are likely to be targeted.
Katz explains there isn’t a “one size fits all” when it comes to risk warnings because this would destroy the creativity of marketing.
He suggests firms should ask themselves why a promotion is clear, fair and not misleading, what steps they have taken to ensure it is clear, fair and not misleading, and what evidence they have to show they have taken those steps.
Meanwhile, the FSA will continue to have specific rules on risk warnings where it feels key information is required to help consumers compare products, such as the way firms calculate APRs.
Katz also announced the FSA may look at whether the prohibition on cold calling for secured loan mortgages is necessary as part of its review into the ICOB regime.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
£92bn transferred since 2015
Achievements, charity work and other happy snippets
Since first announcement