What does it meme? The FCA's published guidance on 'finfluencers'
The FCA has published their guidance on financial promotions on social media, highlighting how firms and individuals can ensure their marketing strategy remains compliant with existing obligations.
Social media is fast becoming the primary method through which younger people are obtaining information regarding financial services. How best to enter the housing market, what products to invest in and explanations of mortgage rates are just a few of the topics where young people are looking to social media for advice. In addition, firms are increasingly using social media as part of their marketing strategy in order to reach a larger audience.
The FCA has released figures which show that only 8% of the population pay for financial advice, and the majority of these people are over 45. This matches up with statistics put out by the FCA that show that the vast majority of independent financial advisers are over 50, with less than 6% being under 30 and the average age of an IFA being 58.
These figures reveal that more and more young people are seeking advice through alternative means, with social media sites and streaming platforms all offering access to individuals purporting to offer 'advice' for free. There are pros and cons of such readily available advice / information, and the FCA guidance (which can be found here) does not seek to restrict this. Instead, the published guidance acts as a reminder for regulated individuals to consider their already existing obligations, including the Consumer Duty, which emphasises the need for transparency and risk management to allow consumers to make well-reasoned decisions, with full knowledge of the risks involved. This was set as a key focus for the FCA in their 2024/25 business plan.
This guidance will likely come as a welcome arrival ahead of the advice/guidance boundary review which is set to be published later this year.
The Guidance Explained
The guidance does not create any new obligations for firms, instead it is intended to demonstrate how firms and individuals might better comply with existing regulatory obligations, such as the Consumer Duty. As a starting point, unauthorised influencers are unlikely to be able to lawfully communicate financial promotions unless they have s.21 approval from an appropriate authorised person. Even if such approval is in place, there remains a duty on the approving firm to consider the content of the communications.
In general, financial promotions should support consumer understanding and communicate information in a way that allows the average consumer to make effective decisions.
The financial promotions themselves should be standalone compliant and provide a balanced view of the benefits and risks of the particular investment or product being discussed. Additionally, the FCA advises that when making promotions, consideration should be given to who the target audience is (and in particular whether they may be vulnerable), what they need to know and what areas of information could cause confusion. Consideration should also be given to the type of investment being promoted, and a clear, appropriately worded risk warning should be prominently displayed, rather than obscured by some design feature of the particular social media platform.
Those firms who utilise influencers should put monitoring and oversight systems in place to ensure that these individuals are not producing non-compliant financial promotions. Ultimately, it is the firm who will remain responsible for any lack of compliance, and any consequences flowing from these.
Unaffiliated influencers (being unauthorised persons promoting financial products without the approval of an FCA authorised person) may be committing a criminal offence. Influencers should carefully consider whether they are the right person to promote a product or service, and what rules and standards will apply to their activities.
Worked examples outlining adverts and 'memes' that would be non-complaint, with a matched example of how to make it compliant, are found throughout the guidance to assist promotors in complying with their obligations.
Summary
The reality is that social media is not only an integral part of modern daily life, but it is now a key component both in how professionals market services, and in how most consumers receive information. Whilst there are clear benefits to such readily available information, the problem remains that individuals could be targeted with unclear and misleading adverts designed to coerce them into investments that are beyond their risk appetite.
This guidance is one in a number of steps the FCA are taking in attempting to enable consumers to help themselves, and it is hoped that this will lead to a significant reduction in the number of consumers investing in 'high risk investments' in circumstances where that does not meet their attitude to investment risk.