Thanks to social media and smart phones, it’s never been easier to create content to promote your business. But there are strict rules that relate to the advertising of financial products and services and it can be easier than you think to step over the line.
Anyone who has tried to sell a financial product will be familiar with those annoying disclaimers that have to go on pretty much every piece of marketing or advertising. But did you know there’s actually a lot more to misleading and deceptive conduct than just forgetting to put some fine print at the bottom of your ad.
Test your knowledge
Test your knowledge with these four examples of financial marketing to see if you understand your obligations. (You’ll find the answers at the bottom of this page).
The marketing team of a new ETF decides to engage a social media influencer (a ‘finfluencer’) to promote their product. They provide the finfluencer with a script that talks about the features and benefits of the ETF and ask the finfluencer to share a link to an online brokerage firm to purchase the ETF. In return, the finfluencer is paid a small fee by the AFS licensee who is responsible for the ETF.
Does the finfluencer need to be licensed to deliver this marketing message?
A mortgage broking firm has updated their website. At the top of the page, under a smiling picture of the entire team, is the following statement: “When it comes to mortgages, nobody does it better than us. We take care of all the paperwork and will get your loan approved.”
Is there anything wrong with this statement?
A licensed financial adviser creates a Facebook ad to encourage people to sort out their financial affairs before the end of the calendar year. The ad says that anyone who books an appointment with the financial adviser for a review of their superannuation before Christmas will receive a free Christmas ham. When a user clicks on the ad, they are taken to the adviser’s website where there is an online appointment booking form. At the bottom of this page is a small line of text that says: “Some conditions apply, click here to learn more.” The ‘click here’ links to another page full of fine print, including the fact that the Christmas ham is only available to the first two customers who book an appointment.
Given that the adviser has included the terms of the deal, do you think their Facebook advertisement is misleading?
An insurance broker wants to increase sales of income protection policies among small business clients, so they put together a blog and a series of social media posts to promote the product. The broker does a quick Google search for an image of a ‘small business owner’ and finds a picture they like of a young man in a hard hat on a construction site. The broker puts the image on the blog and uses it on the social media posts. The headline on the blog and the posts reads: “Income protection for just $1* a day”. In the disclaimer at the bottom of the blog and the ads, the broker notes that the $1 a day quotation is based on a woman working in a white-collar occupation.
Has the broker done anything wrong?
How did you go?
Engaging an influencer to promote a financial service or product in return for payment is a complex proposition and puts you at risk of breaching a number of AFS license obligations, so caution should always be exercised. In this scenario, we do not know the contents of the script the finfluencer has been given, so we cannot determine whether it contains financial product advice. But given that the finfluencer has been paid for comment, it is likely they will be deemed to be providing financial product advice because the arrangement indicates an ‘intention to influence the audience’.
By sharing a link to purchase the ETF, the finfluencer could be considered to be ‘dealing by arranging’. Whether you are arranging for someone to deal in a financial product will depend on the extent of your involvement in making the transaction happen. Care needs to be given to the terms of the influencer agreement, because they could be viewed as being directly remunerated for a product sale.
Finally, as the product manufacturer of the ETF, the AFS licensee has essentially appointed the finfluencer as their ‘representative’ for the purposes of the financial services laws. This triggers other obligations (including ensuring they are adequately trained and complying with the financial services laws).
There is a big difference between ‘will’ and ‘may’. By saying that the firm ‘will’ get the client’s loan approved, the implication is that it is guaranteed that the client’s loan will be approved, no matter what. But given that the firm is not the actual lender, they do not have the power to make this guarantee. ASIC’s guidance states that advertisements for a financial advice service should not create unrealistic expectations about what the service can achieve. Even if the intention of the broking firm is to communicate their service (in this case, that they do loan applications), there is a high likelihood that a potential client would be misled by this statement.
Although the customer is seemingly only being misled about the likelihood of their receiving a free Christmas ham, this is still likely to be considered misleading advertising, because the advertiser has not made it clear upfront that conditions apply. According to ASIC, consumers should not need to go to another website (or another page of the website) to correct a misleading impression. Such behaviour may not warrant a fine in this particular case, but could put the adviser on the radar of the regulator.
There are a few things to be aware of here. Firstly, social media and blogs that relate to your business or a service you provide, or are shared on your business page, are still captured under the rules relating to financial advertising. Next, although the disclaimer specifies that the advertised cost of $1 a day is based on a quote for a white-collar woman, the imagery used implies the offer is for blue-collar men. ASIC says that the use of terms such as ‘conditions apply’ or ‘find out if you qualify’ may not always be sufficient to warn consumers that the advertised product may not be suitable for them, or made available to them, depending on the nature of the product and the distribution of the advertising campaign. By the way, the broker has probably also breached copyright rules by using an image they downloaded from Google. You should always use your own images or those that you purchase or license through a stock photo agency.
The clear takeaway from the regulatory guide is that advertisements for financial and credit products and advice services must give clear, accurate and balanced messages.
Advertising financial products and services: obligations and ASIC’s expectations