Social Media: panacea for true interactive engagement or new set of ungovernable customer communication channels?

27 January 2015

The FCA’s Social Media and Customer Communications Guidance Consultation (GC14/06) published over last summer closed for comment on 6th November. The focus of the consultation was on providers’ use of channels like Twitter and Facebook to promote financial product offerings. The paper focuses on the application of Principle 7 – applying the ‘fair, clear and not misleading’ test for every blog post and Tweet.

It basically means you need to apply the usual health warnings when promoting a financial product via Social Media. So a fund manager’s Social Media promo will need to provide past performance information and also give risk indications. Both risks and benefits need to be appropriately balanced in the communication. Invitations or inducements to participate need to be couched in health warnings about the risks of doing so. COBS rules on Cold calls and other promotions also need to be considered in the context of Social Media marketing campaigns.

Social Media is the sort of channel where a personal recommendation is likely to be given more freely than with other, more formal channels of communication. But if providers are deemed to have given that personal recommendation this is tantamount to regulated advice, the guidance suggests.

Defining this middle ground between information and advice, sometimes called simplified advice, is proving very hard to do. The FCA are coming under increasing pressure to lock the definition of simplified advice down - particularly as the ticking time-bomb of Freedom Day gets louder. Come April many over 55s are likely to be cashing out of their pensions, potentially disadvantaging themselves financially through potentially very long retirements, many without access to financial advice.

This picture just got more complicated still as providers are being asked to form the ‘second line of defence’ (after the Pensions Wise website, as well as online and telephone-based services of TPAS and face to face guaranteed guidance from CAB). Again, providers are pressing for clearer regulatory guidelines to clarify when information provision about retirement choices could step over into personal recommendation/regulated advice. Providers are understandably nervous about where the liability for pensions ‘freedom’ decision-making may fall if and when it all goes wrong.

The truth is the line between information provision and recommendation naturally blurs as the industry uses the much more interactive and immediate Social Media channels in customer communications. We have not yet worked out how to prevent this blurring. We need to build systems which detect when ‘the information provider’ has stepped over a line from providing information/quotes etc. and into an inferred or even overt recommendation without appropriate warnings being provided.

The other key line that providers, as the new ‘second line of defence’, are treading is the one between ensuring positive outcomes for customers whilst also delivering a pleasant customer experience. Few of us enjoy being read reams of caveats over the phone or ploughing through disclaimer questionnaires online but how do we avoid this and yet understand the risks of buying a financial product fast?

Social media channels seems like yet another regulatory hot potato, it should not all be seen as gloom and doom. We are currently developing a new big data offering that is able to gather sentiment-based trends data from analysis of tens of thousands of pieces of information flowing in public forums around the internet each day. Much of this data is created and shared, in unstructured form, over social media platforms.

By setting search criteria (a bit like setting keywords for your PPC campaigns); and then asking a big data aggregator such as Dunstan Thomas to analyse all internet-born data linked to this phrase; it is possible to get a pretty accurate ‘sentiment index’ of what collectively we are thinking about the new pension freedoms, annuities, income drawdown and whichever areas are of most interest to your firm.

It will even be possible for providers to use big data insights to spot gaps in knowledge and understanding associated with specific retirement income options and use this intelligence to work out priorities for future communications.

Post Freedom Day, big data intelligence could even be used to identify and target those positively- inclined towards say guaranteed income products, drawdown or UFPLS. As such, the potential of big data analytics gives providers a means of building a greater understanding of what consumers are really thinking about, weighing up, and how positively they are feeling about specific retirement options. In this sense the growth in use of Social Media channels affecting our market can be seen as not merely an additional regulatory threat but also a potential force for good.

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