A recent survey by financial and business adviser Grant Thornton revealed that more than three-quarters of UK financial services advertisements and promotions are misleading. Are firms doing enough to ensure its financial promotions are clear and easy to understand? What else can be done?
Market views
David Whitely, FSA
The Financial Services Authority (FSA) requires firms to produce material which is clear, fair and not misleading and provides a balanced picture of the product or service.
The marketing must match what the product or service delivers, and the promotions must be easily understood by customers.
Many of the messages highlighted in Grant Thornton's research have been the subject of our work over the last year. For example, we published our concerns in relation to critical illness promotions in August 2005, which included the issue of scaremongering.
Consumers' initial impression of a product can hugely influence their subsequent decision-making so it is important that firms produce promotions that help consumers make the right choice about the right product at the right time.
Where we see non-compliant financial promotions, we may contact the firm with a view to having the advertisement withdrawn and we would not hesitate before using our enforcement powers where appropriate.
We will also intervene to ensure customers who may have been unduly influenced by a non-compliant promotion are offered redress.
Consumers and firms can play an important role in bringing misleading promotions to our attention and we would welcome details of any of the promotions identified in the Grant Thornton research or any other promotions consumers or firms feel are unfair, unclear or misleading or break other promotion rules.
Call us on 08457 300 168 or download a reporting form from our website. Since the hotline and our website's reporting form were set up, action including enforcement and non-enforcement action has been taken in more than a thousand cases.
Alison Turner-Holmes, Skandia
Because our products are only available through professional financial advisers, Skandia is not a significant player in promoting products directly to consumers.
However, we firmly believe in treating customers fairly, and not just because this is a key focus for the Financial Services Authority (FSA), so we ensure that anything we produce adheres to FSA guidelines.
Perhaps if the regulator policed the promotions regularly and set fines for bad practice, maybe there would be less flouting of the rules.
My guess is that most of the misleading promotions are probably promotions to the end consumer rather than from providers to advisers. It would be useful to know if the Grant Thornton survey could break down where the promotional literature originated so that this could be clearly understood.
Promotions are often intended to grab someone's attention and not necessarily supply them with the full story. It is unnerving to think anyone would enter into a contract to buy a financial product simply by relying on what an advert or piece of promotional literature said.
The sales process is the most important part of conducting business as it is then that the headlines of any promotion could be discussed, explained and clarified.
People need to be told what is available to them but anything that bends the truth or is an outright lie should be outlawed.
Compare buying a financial product with an article of clothing. An advert in the paper would provide an image of the item and the price. It would not include washing instructions or a refund policy. Perhaps we are further advanced than many other industries on treating customer fairly.
John Joseph, John Joseph Financial Services
Let us look at what is not misleading. Some 100% of all people who have life insurance will die. Some 100% of all people who do not have life insurance will die.
One in three of us will get cancer. So what if the figure is not completely right. Does it really make any difference if the facts are slightly wrong?
For quite some time I have sat back and listened to do-gooders point out that we should not use scare tactics to sell insurance, in particular critical illness (CI) policies, as the policies do not cover all types of cancer or strokes.
However, the worst-case scenario is that the client who cannot claim is as near healthy as they were before they took out a policy. But what about those people who would have taken out a policy but then changed their mind after a spokesperson suggested the statistics are wrong?
How do these clever statisticians live with the fact that their own statistics say that one in three of the people they manage to convince not to buy CI cover will get cancer?
Of course we sell for a living, but we do good. Faced with a real client riddled with an illness that we could not stop we can at least alleviate their financial stress. What possible advantage did the Grant Thornton research team obtain for humanity?
Richard Walsh, ABI
In March, we launched a scheme called Customers Impact, to which almost 90% of the industry has signed up.
It commits companies to placing customer interests at the heart of how they run their businesses. This includes ensuring promotional material is of a consistently high standard.
We have already produced a resource pack for insurers with guidance on how to ensure material designed for customers is clear, fair and not misleading. A similar pack for providers and advisers will be published soon.
CI cover has attracted a lot of interest recently due to declined claims. In many cases, better customer understanding of the product would have greatly reduced the number of claims that are turned down.
In other cases, better worded application forms could have avoided non-disclosures resulting in declined claims.
Insurers want to pay all valid claims, and it is in no-one's interests for people to buy policies they do not understand or that do not pay out because of avoidable non-disclosure.
To this end, we have produced guidance on how application forms can be worded more clearly to minimise the risk of non-disclosure of pre-existing medical conditions.
And more recently we published advice on how definitions of illnesses covered, and of the product itself, can be made much clearer. We expect that these measures will reduce the numbers of declined claims.
