Companies selling us financial services last year spent #1.4bn persuading us to invest in their products – that’s around #25 for everyone in the country, including children.
Although most of us like to think of ourselves as clever consumers, carefully weighing up the pros and cons of different savings products, credit cards and the like, few can claim they are not influenced by advertising.
According to figures from the Financial Services Authority, the financial service sector’s increasingly active watchdog, 38 million of us have seen financial services advertising on TV, the same number by post and 27 million of us in newspapers.
But watchdogs are growing increasingly concerned that we are being misled by this marketing bombardment.
As a result, those who sell financial products are facing increasing scrutiny and stricter rules from the FSA controlling the way they advertise.
Most of us, it seems, are aware of the main problems with financial services advertising. In a survey to mark its 40th anniversary this year, the Advertising Standards Authority carried out research to find out more about the public’s perception of advertising.
The results, published last month reveal that we are concerned by what the advertising watchdog calls ‘truthful untruths’.
These are adverts in which companies do not actually lie, but do not tell the whole story. The financial services sector was highlighted as the area where this problem was seen to be particularly prevalent.
‘Untruthful truthful advertising’, according to the advertising watchdog, is ‘the advertising of significant purchases, mainly financial products, that highlights substantial benefits but is vague in its communication of the full implications or downsides’.
And the problem, the organisation says, threatens to make the public cynical, critical and doubtful about all advertising messages.
As he released the research, Lord Gordon Borrie QC, chairman of the Advertising Standards Authority (and also of the Foundation, the accountants’ regulatory body), said: ‘While the research reveals the public’s enjoyment of advertising, its message is that neither the advertising industry or the ASA can afford to relax.
‘The public’s concern about ‘untruthful truthful’ advertising is a sharp reminder that consumers will not accept deceitful or misleading claims.’
‘Untruthful untruths’, however, were not the only concerns the public had about financial product advertising.
Some financial product providers were thought to hide behind what the ASA describes as ‘weasels’ which, in the consumer’s mind, are there to protect the advertisers. According to the ASA’s research: ‘Recognised weasels are words such as “from”, “terms and conditions apply”, “limited stocks available” and “subject to status”.’
The findings of its survey will be used in devising future policy by the Committee of Advertising Policy, the body which sets the rules the ASA enforces.
Watchdogs at the Financial Services Authority have been conducting their own work in the area. At the beginning of the month it published proposals designed to raise awareness of the standards it sets in the area, and to encourage consumers to spot and challenge advertisements they think are misleading.
The FSA’s rules say that adverts of firms they regulate must be ‘clear, fair and not misleading’.
When it comes across firms it thinks breaches its rules, it contacts them and asks them to change or withdraw the advert in question. Where consumers have lost out, it will ask the firm to offer recompense. Its final resort against those who refuse to carry out these actions is to name and shame them, along with imposing a fine.
In order to beef up its activity in this area, the FSA is taking some immediate steps, and considering others in a consultation paper.
The immediate steps include the publication of regular consumer bulletins which will include anonymous case studies, and the setting up of a hotline to encourage consumers to call the FSA when they spot an advert or marketing brochure they think is misleading.
The longer-term consultation paper proposes that firms should be banned from using past performance of, for example, a savings fund, as the predominant message in an advert.
It also puts forward other restrictions on the use of past performance, along with proposals to make it clearer in adverts that past performance does not always link to the future performance of a product. Christine Farmish, the FSA’s consumer director, says: ‘Most firms do adhere to the spirit of our rules.
But current market conditions put the spotlight on three areas that need particular attention.
‘They are: a lack of balance between the benefits and drawbacks of a product, claims that can lead to unrealistic expectations; and key information that gets buried in the small print. Our research shows that most consumers don’t read the small print.’
She adds: ‘Our proposals on past performance are designed to ensure that such figures are not viewed in isolation but considered alongside other important factors, such as flexibility, charges and investment strategy.
‘We are also progressing work to develop a standardised way to present past performance, which could be introduced in the future.’
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