Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK

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1 01 Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK The FCA published its guidance consultation on social media and customer communications. It had been long awaited, and looking at guidance papers from regulators like the FFIEC in the US who published a paper in Dec 2013 that encompassed risk assessments, social media policies, procedures, best practice and more, there was quite a lot of anticipation for the clarity the regulator would bring. The paper has been developed following engagement with other regulators both in the UK and overseas and other interested stakeholders, so I admit I was expecting more. The subtitle of the guidance paper reads The FCA s supervisory approach to financial promotions in social media and that's fundamentally what this guidance covers. As social media is primarily about engaging and building a community, and not another channel for companies to bombard with adverts and one way broadcasting, I rather feel they ve missed a great opportunity here. Perhaps because the FCA say that any conversations held outside the course of business does not fall under their regulation, they re choosing not to give more than regulatory guidance? Or perhaps it s because they don t feel as though they re in the best position to talk about operational or brand risk? The eternal optimist, let s take a look at the positives from this guidance consultation: It is the first European regulator to issue guidance specific to the medium, so well done for pioneering this. The FCA recognise that digital media are now becoming the media of choice in many cases for customer communications More particularly, firms are using, or wanting to use, social media forms of digital media (social media) for their communications with customers. For those firms yet to recognise th e significance of digital and social media (it s 2014 people, come on) the regulator calling out it s popularity and significance can only be a good thing. Social media is something to take seriously in your business. Importantly the FCA see social media as a great way of promoting effective competition and as a leveler for smaller firms to be able to compete along side larger enterprises. social media specifically may allow business to reach a wider audience in a way which increases consumer awareness and knowledge; and, permit two-way communication as well. We see significant potential benefits from the use of all digital media by firms So the regulator is actually keen for the financial world to use social media. We recognise that social media are particularly powerful channels of communication and therefore of significant value to firms. We do not want to prevent their use.

2 02 Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK Part 2 Understanding what Social Media is Social media today is pretty much the internet, as it s anywhere on line where 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? Any firm or network waiting for the regulator to provide more detailed guidance should take this as a sign to start with their social media now. Every firm needs to go through a cultural shift as they adopt and use social media. This takes time, and the larger the organisation, the longer the time taken. Social Media will require a cultural shift including policy changes If your compliance department says their policy is a 3 day turn around, and all your tweets need to be compliance approved then this just isn t going to work. Firstly compliance will spend all day reading tweets and unable to do their real work, and secondly twitter is for at the time conversations. In 3 days that conversation and many more will have been and gone. The FCA then rightly realise firms may legitimately perceive difficulties in complying with some of our rules, particularly with our financial promotion rules. I commend the regulator for acknowledging that social media is unlike other media and the very nature of its ability to be shared so easily and that this can be across borders as well as demographics raises issues around compliance that other media doesn t. It maintains its stance that rules are intended to be media-neutral. The FCA offers examples Like the guidance consultation on retail investment advice, the regulator has started to give examples of what is and isn t compliant. For example the image below is compliant:

3 03 It s a non-promotional communication that focuses on the firm s non-regulated activities. Not only is this a good illustration of compliance, it s an important part of what social media is about. Talking about what you do, who you are, how you make a difference in broader terms than trying to sell a product. If this message said We also invest in our trading technology, to help get you the best returns! instead of We also invest in the community with charity work! then this would not be compliant and constitute a financial promotion. It would be good for this tweet (about charity work) to link back to City Shares blog to an article, page, video, etc that then demonstrates/explains/gives the reason behind the charity work and why it aligns with the firms value. This is great news for all firms because you ll get more engagement and therefore influence with this type of conversation. Not all social media falls under Regulation Social media conversations involving groups and individuals not acting in the course of business are therefore outside our regulation. The key factor is the purpose of the communication rather than who is making it. This is a hugely important point, and why you ll see so many IFA s very comfortable with their social media engagement. The majority of the conversations on line never fall within regulation. However they do add bottom line value to the business. This important distinction needs to be discussed with your compliance team. If your social media policy dictates that all communications which fall outside of the regulations can be engaged in freely (although monitored), but all communication which fall within the regulations need to be compliance approved first, then we re working towards a more viable option. If you find yourself on social media moving from a conversation that is non-regulated towards regulated topics in the course of business then why not ask the person if you can switch the conversation to the phone/ ? If it s within a group, then let them know you re going to come back to them, the area is now falling under regulation and you ll be back in 3 days with a full response. Anyone who wants to talk to you sooner than that can contact you directly (on the phone/ /more traditional channels). Remember, most of social media stays around, group discussions on LinkedIn, blog posts and comments etc, so having a record of the conversation for others to view as and when they discover it is of more value to you than simply having private phone conversations that others can t observe.

4 04 Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK Part 3 What happens if you ve only got a personal account? The regulator makes reference to where a personal social media account is used by someone associated with a particular business, for example a senior person at the business, that individual and the firm should take care to distinguish clearly personal communications from those that are, or are likely to be understood to be, made in the course of that business. What does that mean for you if you run a personal account? Well if you re truly running a personal account, then you ll not end up in conversations where you ll be acting in the course of business. So that s resolved. What is more likely is you call your account personal, engage on mainly personal conversations, but are also connected to industry peers, friends, colleagues. This could either be to get round compliance, or indeed compliance departments that don t allow the use of such platforms, or because when you started the account you didn t see how it would relate to business. But ultimately you ve had conversations that talk around your industry. Either way it s now no longer a personal account. It s an account that s used in business which has a largely personal element to it. (Which is actually a great way to be on social media the clue is in the name really.) For advisers that fall into this category and are in a network that doesn t support the use of social media in business, then this could become a real issue if it s not addressed. The sensible approach is to remember, only certain conversations fall under the regulation. Banning all engagement because a small percentage needs to be managed compliantly is not an acceptable solution. Social media is supported by the regulator, it s time to find a way to allow social media in your firm or network. The Retail Investment advice guidance and where it fits in Pulling in the FCAs last guidance consultation named: Retail investment advice: Clarifying the boundaries and exploring the barriers to market development allows you to get a good understanding of how the regulator views social media and digital correspondence. The purpose of July s guidance consultation is to address the expectations gap where the regulator considered how any difference in understanding might affect the availability of products and services offered to customers and the extent to which this may be affected by a lack of clarity around our rules, their implementation and their supervision.

5 05 The project identified three main areas for additional work: What is, and what is not a personal recommendation (the subject of this paper). How we might give firms more confidence to provide shorter, more useful disclosures to customers about their products. How we provide guidance to the industry and how this supports confidence and innovation in products and services. As July s paper only covers the first area, it might be the FCA is waiting until it s completed its guidance on the second two before it talks about more than regulatory guidance around social media? This expectations gap has arisen because of the development of technology over the past few years. So we re talking digital communications, of which social media is one part of. Social media doesn t sit in a silo, it s an extension of what your business is already doing and part of the mix to consider when looking at new things going forward. It s the window into your business that allows others to see what you have to say and what others have to say about you in a way that: demonstrates your authority and relevance shows your personality gives insights into the types of people you communicate with and sorts of conversations you have see what others think of you connect on a personal level All of which help prospects see what sort of business you offer, and an insight into the personality of the leader and team involved in delivering the service, the authority and leadership and thinking of your business. It builds trust and a sense of comfort in knowing any prospect is dealing with a firm that a) knows what they re doing and b) are people they re happy to do business with. These are all integral qualities when your prospects are considering trusting you and doing business with you. Read more. ( mediamedia.co.uk/5-reasons-social media-media-essential-business-tool/). If we can agree to this, then we can agree that financial promotions is only a small part, or in many cases a non existent part to a social media strategy. In both consultation papers the FCA have given examples of what falls under regulatory restrictions and what doesn t, and when they do, what is considered compliant and what isn t. The July consultation on Retail Investment Advice covers 56 pages, so I ll just point back to the most relevant in terms of social media guidance. The regulator has put specific guidance referring to social media giving clear examples as to what falls under regulated or non-regulated advice. We 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 media networks.

6 06 In turn a number of your followers will read it and share it out with their network. So your social media networks, their social media networks and your website are all part of the mix. When a visitor arrives at your website, they now also have the opportunity to share their details with you to find out more about how you can help and be part of your marketing, subscribe to your newsletter/blog, or whatever your offer. All of these forms of communication fall under the FCA regulations. The FCA noted that some firms were being overly cautious in their approach to online communications and speaking to many firms, particularly larger institutions, this has certainly been the case. Being unsure of what could or could not be said online without falling foul of the regulator has lead 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. Read more ( media-media/). Fully understanding both guidance papers makes it clearer to understand that: To see our current mortgage offers, go to is compliant, but realise To see our great mortgage offers, go to is not.

7 07 Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK Part 4 So when is it appropriate to use a financial promotion on social media? There are many different ways to attract the right kind of attention to your company. Many firms opt to buy this attention in the form of ads or lists that interrupt peoples conversations or drop into their inbox uninvited. It requires less effort, can have a faster impact, and you can measure the results easily. It's largely one way communication. The basic problem with this is: a) you need big numbers of data b) as soon as you stop spending money on ads/ buying lists, then you stop having any impact. The biggest budget usually wins While it can deliver results, especially if you re smart about who you choose to show your ads to and really target your audience, on it s own it s still old school thinking. We now have the technology that allows us to have a two way dialogue and open debate and conversations across the globe. That s a major shift, and it s happened so quickly that commerce is struggling to keep up. How often is it appropriate to use a financial promotion? This will largely depend on where your business fits on the social norm/market norm scale Social norms are wrapped up in our social nature and our need for community, in social norms reciprocity is not immediately required. The second world, the one governed by market norms, is very different. There s nothing warm and fuzzy about it. The exchanges are sharp- edged: wages, prices, rents, interest, and costs- andbenefits.. ( pter-4-%e2%80%93-the-cost-of-social media-norms/). When social and market norms collide, trouble sets in and that s exactly where businesses on social can get into trouble. Social media is where both worlds collide and we look to simultaneously operate in these two different worlds. One where social norms prevail, and the other where market norms make the rules. Think about it in terms of a friendly bank who treats each customer like a friend, if you need help, just ask, we re here to help, staff remember them by name when they go in to branch and ask after their family etc. In this scenario, when the customer goes over drawn and automatically gets a computer generated letter charging them for their error how do you think this customer feels? A quick call from the bank politely asking them to pay some money into their account to address the issue by a certain date or they may face a fine, is much more in keeping with this style of business. This mix between the social norm and the market norm.

8 08 Most importantly, the damage done to the relationship is a lot harder to repair. Conversely, the customer of a bank where everything was just transactional, all market norms, wouldn t expect anything different but a computer generated letter if they went over drawn. Any time you re looking at achieving In-bound marketing where you attract people to you, then you re less likely to want to use a financial promotion across your social networks. Anytime you re looking to achieve much more transactional results, then financial promotions will be a larger part of your mix. These will be digital, but evaluate if looking to build a social following is the best way to achieve these goals, or would you be better using ads within the social channels? Automation of social media As an aside, this rule of thumb is true of any automation you look to use in your social media. The more along the social norm you are, the more careful you have to be about the tools used for automation and what you automate. Any tool used to be engaging like automated favouriting of tweets, retweets and automated how are you? tweet is more likely to do long term damage amongst your followers as it comes across as inauthentic. Imagine if your friend automated their communication with you? If that feels wrong to you, then it s wrong for your social community too. However, in the market norm, automation for efficiency can be viewed as par for the course. It s all about authenticity. If there is such a risk in mixing social norms with market norms, then why bother in the first place? That s a great question, and that s exactly what the shift in business caused by social media is all about. The consumer has driven this change, for the first time technology has allowed consumers, buyers, clients alike to start to be heard in a way that hadn t been possible before. The consumer is demanding a mix of social norm, relationship building, feeling listened to and cared for, as part of a pre requisite for doing business these days.

9 09 Response to the FCA gc14-06 Social media and customer communications by Bridget Greenwood, Financial Social Media UK Part 5 If you are going to use financial promotions, what do you need to know? Any time you do want to actually share a financial promotion, the regulator suggest the use of #ad as a generally accepted way of making it clear it s a promotion. To get past the character limitation the sites like Twitter impose, the regulator suggests using an image or infographic. The image itself needs to be compliant, and if there is any possibility that the update can be shown with a link to the image rather than the image itself, now or in the future, then each component of the message needs to be able to stand alone and be compliant. So the tweet and the image (in this example) both need to follow the rules. As it depends so much on which device a user is using to read a tweet, it s impossible to say whether or not the image will appear embedded in the tweet or as a link therefore I would always make sure both the tweet and the image are stand alone compliant. Whenever you do use an image, think carefully about the rule of prominence, consideration should be given to the target audience, the nature of the product or business and the likely information needs of the average recipient. Remember using an image and image advertising as defined by the FCA rules are two different things. Always get your images compliance approved before sharing, if the images are acting in the course of business. What happens when your updates are shared? The FCA talks about where you stand from a regulatory view when your financial promotion is re-shared. Unlike traditional media, in social media, it s very easy for someone to part share or modify and then share what you have to say. It s also possible that while you were careful to ensure only your intended recipients got your message, what happens if they then share it out to their audience who aren t part of that same mix? Under the banner Fair, Clear and not misleading, the FCA states: Firms should ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient (through others retweeting on Twitter or sharing on Facebook. It then goes on to say One way of managing this risk is the use of software that enables advertisers to target particular groups very precisely.

10 10 I d like to see some clarity by the FCA on this, what do they mean by use of software? If you use targeted or promoted tweets, and the target audience then choses to reshare it? Does this not create the same problem that you were trying to avoid? The use of secret and closed groups with a target audience might overcome this issue, but then you also need to remember Providing definitive guidance on whether something is regulated advice depends not only on the facts of the individual case, but also the context. 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. 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 this can be seen as a personal recommendation and then falls under regulation. Then under Other regulatory issues, the FCA states: Where a recipient shares or forwards (such as by re-tweeting) a firm s communication, responsibility lies with the communicator, so in that case the firm would not be responsible. I see this as in direct conflict with what they ve said under the banner Fair, Clear, and not misleading. Some extra guidance on this would be very much welcomed. What happens when you reshare an update? The FCA states: Where a firm re-tweets a customer s tweet (for example one expressing satisfaction with the service received from the firm), the firm is responsible as the communicator, even though the firm did not generate the content of the communication. Which is fine, but can we please have some clarification and examples of when what is reshared is fine, and when it falls under regulation? International communications This is a particular area for international companies like asset managers, as reshares of social updates can cross globally and has no borders, one of the things that is really missing globally is the collaboration of global regulators to help international firms with the global regulation of social media. Unfortunately in this guidance the FCA can only comment that our rules cover all financial promotions capable of having an effect in the UK, unless an exemption is available. I d very much like to help companies that face international regulation to be able to have a voice and start to communicate their legitimate concerns about using digital and social media in an effective and compliant manner and co-ordinate are efforts at getting some global regulatory agreement. If you d be interested in this, or know someone who would be, please get in touch: bridget@financial-socialmedia.co.uk

11 11 Real time and digital media The FCA clarified that a promotion is non-real time and therefore subject to our conduct of business rules where it creates a record of the communication, is directed at multiple recipients, and does not require the recipient to respond immediately. It would therefore regard a tweet as an example of non-real time promotion. This would be true of any social networking update. Unsolicited promotions With regards to social followers, a follower on twitter, or someone who has liked your facebook page does not in itself constitute an established existing client relationship for the purposes of COBS 4.8.2R (1) or and express requires for the purposes of MCOB (2) (b). There are a lot of options now in terms of service providers to help you archive your social media. Previously it was only Arkovi (now RegEd) that offered an affordable solution to smaller firms, but there are more on the market place now. You can find out more about archiving solutions here (first published Sept 2012). mediamedia.co.uk/socialmedia-media-archiving-the-f inancial-advisers-guide/ Conclusion There really is no excuse for a firm and networks not to start using social media, excusing their decision with waiting for the regulator to come out with more guidance. You know the regulators stand on using social media, and you have enough guidance to at least get started. However, where there are areas outstanding where firms may legitimately perceive difficulties in complying with some of our rules, particularly with our financial promotion rules it would be good to see a contact point at the FCA where a company could explain their campaign or strategy, highlight the areas of concern they have with regards to clarity of the rules and seek approval for their social media before the event. This would mean that lack of clarity wasn t preventing firms from being overly cautious. Clearly this would require some defined criteria, as it is unacceptable to expect the regulator to clear every social media campaign or strategy just because a firm wanted to seek approval first, rather than there being a genuine case for clarity. The FCA is inviting us all to send our comments by to Richard.Lawes@fca.org.uk by 6th November. If you d like to know more about how you can practically start to take the business procedures and steps to either get started, or to improve what you re doing on social media within your firm then get in touch bridget@financial-socialmedia.co.uk. You can discover more at head to our blog for up to date thoughts and articles on social media in finance and head to resources to grab a whole bunch of free resources to help you with your own social media.