Are the advertisements for your financial services balanced? Are your marketing campaigns making clear the risks and benefits of your financial products? Your financial services regulator is concerned that they may not be. To address this concern, ASIC yesterday released a consultation paper and draft guidelines relating to the advertising of financial products and services. This ‘good practice guidance’ is not proposed to be a prescriptive standard but non-compliance with the guide may influence the degree of interest ASIC will take in your marketing activities.
ASIC’s consultation paper contains 21 proposals which clarify what ASIC considers to be good practice in relation to the promotion and publication of financial products and services. Below are 10 highlights of the paper, together with issues that your business may need to consider.
1. The guidance would apply not only to promoters (e.g., product issuers) but also to publishers.
The broad term ‘publishers’ may include advertising agencies, mailing houses, printing companies and media outlets. Consider how you would persuade these third parties to continue publishing your marketing material. What reward would they demand in return for the increased risk? How would you respond if a third party refuses to publish your campaign?
2. Warnings, disclaimers and qualifications that apply to a financial product must have a proportionate level of prominence and be self-contained.
Consider how prominent your disclaimers are now. Are your warnings contained within your advertisements or are they set out elsewhere? A television or billboard campaign that includes a qualification in fleeting, small text may receive adverse attention from ASIC.
3. Only compare like products with like. Awards for products must be explained.
Consider carefully any advertising that compares your product with others. Do they have similar terms? Have your financial products and services won awards? ASIC expects you to explain each award so that consumers can consider the value inherent in the implied endorsement of the award-givers.
4. Take care when using emotive words such as ‘free’, ‘secure’ or ‘guaranteed’.
Lawyers already get very agitated when they read words such as these in advertisements for financial products and services. ASIC’s guidance emphasises that they should be used sparingly, if at all.
5. Photographs and other images need to be used carefully, so as not to mislead consumers.
ASIC particularly cites photographs as an emotive tool used to influence consumers. Earlier this year, ASIC asserted that photographs used in prospectuses could be ‘distracting’ and that prospectuses should disclose when they have paid celebrities to feature in them. ASIC now proposes to go further by suggesting that celebrities who know little about financial products should not endorse them.
6. Information in advertisements must be consistent with that contained in disclosure documents.
Disparity between an advertisement and a product disclosure statement may mislead consumers. The Financial Ombudsman Service has recently determined that a brochure can be misleading, even if it refers the reader to the relevant product disclosure statement for the full terms of the product. ASIC’s guidance suggests it would support this view.
7. Disclaimers in audio advertisements should be read at a speed that is comprehensible?
Do you advertise on radio? You might need to consider booking more time. If an average listener cannot comprehend the warnings contained in your advertisements, then you are at risk of attracting ASIC’s attention.
8. Information in video advertisements must be easy to understand on a first viewing.
Would an average first-time viewer be able to read the disclaimers in your television commercials? Is the factual information undermined by distracting sounds or images? ASIC does not want viewers distracted from important information - such as information about risks. This is a vexed issue for advertisers, since the most effective marketing is that which itself is distracting.
9. Internet advertisements must be self-contained and able to be recorded by consumers.
Can you enlarge your banner advertisements? If not, then you might need to abandon them. ASIC does not expect readers to have to follow a link in order not to be misled by an internet advertisement. Consider also how internet users can print your online advertisements.
10. If an advertisement promises a benefit that may not be available if circumstances change, merely withdrawing the advertisement may not avoid misleading consumers.
Do you promote your products as having the ‘lowest fees’? Consider for how long that statement will hold true. ASIC’s view is that advertisements may create lasting impressions on consumers. You should consider whether you need to qualify prominent benefits by indicating that circumstances may change and the benefit may not always be available. ASIC’s view is that all benefits must be available for a reasonable period.
These proposals are intended to complement, not replace, the detailed guidance that ASIC has published in relation to specific products, for example, unlisted property schemes and debentures.
ASIC plans to issue separate guidance for credit products and services later, once it has a more developed regulatory experience in that area.
What you should do
You have until 25 October 2011 to provide ASIC with feedback on the consultation paper and draft regulatory guide. If you have any concerns about the way in which these proposals may affect the promotion of your financial services, you should convey those concerns to ASIC. We can help you do that.
In the meantime, you should start reviewing your current marketing campaigns to determine the extent to which ASIC’s proposals may require you to change your practices come January 2012, when the regulatory guide is due to be released.
We have extensive experience in assisting our clients with the marketing of their financial products and services through television, radio, internet and direct mail campaigns. To view the consultation paper and draft regulatory guide, please click here.
For more details on managing the impact of these reforms on your business, please contact:
Michael Hodgson | Special Counsel
T +61 2 8233 9756
F +61 2 8233 9555
Mark Lindfield | Special Counsel
T +61 2 8233 9632
F +61 2 8233 9555
Scott Sloan | Partner
T +61 2 8233 9554
F +61 2 8233 9555