Following on from last year’s consultation, the FMA has issued new guidance on how ‘fair dealing’ requirements in the Financial Markets Conduct Act (FMC Act) apply to advertisements for financial products.
While the FMA’s guidance explicitly focuses on investment options, it’s easy to see how its principles apply to all financial services, including insurance advice. So, I’d like to talk a bit more about why Financial Advice NZ fully support these underlying principles, and why we believe it’s important that they’re top of advisers’ mind.
Doing the right thing by New Zealanders
Before we focus on what ‘good’ advertising of financial products looks like, I think we need to understand its impact in the current context.
The expression ‘uncertain times’ may well be one of the most over-used phrases in the COVID era, but that doesn’t diminish the fact that heightened uncertainty is a feature of our everyday lives right now.
When faced with financial vulnerability, it’s only natural to look for solid ground, comfortable explanations, and easy solutions. Many Kiwis have suddenly found themselves in this place of vulnerability over the past couple of years, and that’s why we need to make sure that they receive clear, reliable, substantiated information from our sector.
Fair and transparent advertising is about doing the right thing by clients, and by all New Zealanders.
The broad meaning of ‘advertisement’
It’s key to note here that, under the FMCA, ‘advertisement’ has a broad meaning for the regulator. Its boundaries extend beyond traditional forms of advertising, encompassing any medium used by financial advisers to present their services to the public.
Think of your website, social media, brochures, promotional fact sheets, newsletters, direct mail (including emails and written letters), presentations, seminars and so on. Anywhere your services are in front of consumers – that’s an advertisement in the eyes of the regulator.
This calls for a holistic approach to the messages advisers put out there, and the tools they use to share them. And while in these times of fast-paced communication it’s easy to get our message out, it can be equally easy to overlook its meaning and the impact it might have, depending on who’s on the other end, listening. Here’s where the principles set out by the FMA will come in handy.
What ‘good’ advertising looks like
When it comes to fair dealing provisions and advertising, the FMA identified the following three principles:
1. What matters is the overall impression. Whether an advertisement is misleading, deceiving or confusing depends on the overall impression of the consumer – their perception, rather than the intention of the advertiser.
2. Omissions can mislead, deceive and confuse. Regardless of whether an omission is deliberate or not, omissions have the potential to mislead the consumer, especially if they have limited personal knowledge of the financial product.
3. For the same reason, any claims must be substantiated.
Now, in this age of instant communication, it can be tempting to pick up the pace and accelerate, especially when using short-form advertising like social media. But, as we know, financial products are complex, with many different cogs and wheels to them. This means it’s not always possible, or recommended, to summarise the important bits into a one-liner.
What’s more, how consumers perceive your advertising is subjective, based on personal experience, ingrained biases, and level of financial awareness. Sometimes, to avoid misunderstandings, more context is necessary.
With all this in mind, it’s a good idea to always err on the side of caution by:
- Assessing that ‘first impression’ from different points of view – from the expert to the laymen – keeping customer vulnerability top of mind;
- Checking that all relevant information has been included – if the space doesn’t allow it, you may consider linking to a landing page for further information and disclosure.
- Ensuring that all claims are justified – for example, stats taken out of context can be misleading, and may require more details.
Truthful, careful and empathetic advertising is all about informing, rather than selling. And with more and more Kiwis finding information online these days, getting it right can really help our sector promote financial literacy and foster trust in advice.
There’s help at hand
Lastly, a friendly reminder that you don’t have to go it alone. While adviser businesses are ultimately responsible for their own compliance, you may consider working with a marketing/advertising agency that has proven experience in financial services: they will likely understand the jargon and the potential ‘red flags’ to avoid. It’s a good place to start.
And of course, there are great compliance experts in the market who can help you navigate the path to meeting all regulatory and compliance demands, including with advertisements.
As for Financial Advice NZ, we’re here to support our members with guidance and advocacy. For more information about our activities, we welcome you to visit financialadvice.nz and get in touch with the team.