The regulation of financial services companies is badly damaging the UK

03 Aug, 2021

A few years ago we ran a campaign which tried in a small way to change how risk is talked about in consumer advertising for investments. The campaign in question was built around storytelling and, working with the client’s compliance team, we integrated the risk warnings meaningfully into the narrative. The campaign ran in press ads and taxi tip-ups.

The campaign ran for a couple of months with no issues, until someone from the FCA got into one of the cabs, read the copy on the tip-up and decided there was a problem. Cue the client receiving a formal letter and us very rapidly having to convert the last remaining elements of the campaign to good old “Capital at risk” stuck on the end of the ad.

The narrow field of not being promissory and always including “Capital at risk” has created an environment where it is incredibly difficult to really get across the benefits of investing, balanced against the realities of risk. I completely understand where these rules have come from but the way they are structured can really inhibit communication.

Investing is still vastly misunderstood. There are established fears that by investing you are more likely than not to lose all your money. The way we communicate risk doesn’t help. It’s like having ‘Risk of death’ at the end of a car ad.

And the argument that it is up to clients to interpret the guidance for themselves is further damaging. It inhibits creative solutions and active debate about the best way to communicate with the people that matter, end investors. Compliance departments are naturally cautious because it all relies on their interpretation and the damage of the ‘wrong’ interpretation is so punitive. The system is so broken that enforcement relies on a random FCA employee hopping in a taxi at the end of a campaign.

The self-regulation system also leaves a wide window for those who are prepared to ignore or extremely loosely interpret the rules to run marketing that is genuinely inappropriate for the audiences it is targeting. Which leaves us in a situation where those companies that the regulator would like people to invest in – well run, conscientious and stable companies – have less freedom to communicate than those who the regulator (by its own admission) would really rather the majority of people didn’t invest in.

And this is why it’s a problem. Every potential investor who doesn’t engage in their financial future is missing out, not only on the impact investments can have on securing that future, but also at a larger scale the difference responsibly invested money can have on the world.

What can be done about this? In the current system not much; compliance departments basing decisions on an interpretation of regulations should be cautious and risk averse. Therefore, really the FCA need to have an open and honest review of how communications are policed. But the guiding principle should be that the more people who invest with good companies the better. And that does not feel anything like the current attitude. Because with the changed pensions regime and the widening advice and wealth gaps, we desperately need people to pay more attention to their long term financial plans. Workplace pensions are great, but at the moment they are a sticking plaster over what will become a gaping wound.