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FCA Guidance paper: Retail investment advice – and how it relates to social media

The FCA’s guidance paper on Retail investment advice: Clarifying the boundaries and exploring the barriers to market development is a great first step in recognising communications across different medium do bring with them different considerations. The FCA until this point when discussing social media always referred back to any financial promotion rules as being ‘media neutral’. But now we have a guidance paper that’s looking at supporting good practices in innovation (eg, use of technology).

Social media is more than a few networks

If you understand that social media is so much more than a handful of social networks like LinkedIn, Twitter and Facebook, then this is great news from the FCA. Social media today is pretty much the internet, as it’s anywhere online people can easily interact and share their opinions. Try and think of a website you visit that doesn’t allow comments or the ability to ‘like’ or rate somewhere on it.   It’s even more noticeable when you think about mobile devices. What helped you chose the last app you downloaded – was it the ratings (of a bunch of strangers) that swayed you?

Social networks aren’t the place to sell, they’re the place to build relationships, show your authority and engender trust and drive people to your website. Logically then the financial promotion rules really shouldn’t apply to the messages shared across your social networks – as you’re not talking about specific financial promotions.

Regulated and non regulated advice online

The regulator however has put specific guidance referring to social media as to what falls under regulated or non regulated advice.

I always recommend best practice is to share financial education, insight, thoughts and opinions in the area of your expertise, whether that’s general financial planning, cash flow forecasting, later life, mortgages, investment, wealth management etc. Write an article on your website (your blog) and share the link out across your social networks.

The FCA noted that some firms were being overly cautious in their approach to online communications – and speaking to many firms, particularly larger institutions, I’ve found this has certainly been the case. Being unsure of what could or could not be said online without falling foul of the regulator has led to their overly cautious attitude.

The good news about this latest guidance is it helps clarify how exactly what insights you’re sharing and whether they fall under ‘regulated advice’, ‘generic advice’, and ‘personal recommendation”. The regulator clearly states: “General advice about financial planning is generic advice and is not regulated.”

“For advice to be regulated at all, it must relate to a specific investment and must be given to the person in their capacity as an investor or potential investor, or in their capacity as agent for an investor or potential investor, and relate to the merits of them buying, selling, subscribing for or underwriting (or exercising rights to acquire, dispose of or underwrite) the investment. If it does not have all of these characteristics then it is generic advice and is not regulated.”

The regulator goes on to say “Providing definitive guidance on whether something is regulated advice depends not only on the facts of the individual case, but also the context.” But lays out clear examples and has included a table of what forms regulated and non regulated advice.

Messages across social networks

Sensibly the regulator recognises “many of the messages that are sent or ‘posted’ in batches to customers or potential customers are unlikely to amount to personal recommendations.” Sharing out your insights and thoughts from your blog across twitter isn’t going to form part of regulated advice.

But the regulator considers how a firm chooses to target it’s audience and the context of the message to determine if something is generic and therefore non-regulated, or could be considered a personal recommendation.

The very fact that you’re sharing your message to a multiple audience does not mean it’s not always counted as generic non regulated advice. If you choose to send tweets to specific people and you’re sharing your insights about a product, then this could be construed as a personal recommendation.

The same goes for a Facebook group or LinkedIn group for example. If you’ve got clients and prospects that fit into a certain criteria and you’re sharing your thoughts and opinions on a certain product then again this can be seen as a personal recommendation.

People’s behaviour online

The guidance paper goes on to share just how important the internet is today for potential investors, and how many people turn to the internet for help and guidance. It even categorises the types of behaviours into Confident Self-starters, Eager Learners, Hesitant Hopefuls. The use of social media by financial firms is an excellent opportunity for them to put themselves in front of these prospects and this guidance paper is a great step forward to being clear about how firms and advisers can do this staying the right side of the regulator.

First published on the Financial Social Media UK website: July 2014



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