Financial advertising compliance has improved, says FSA

"We expect all financial promotions to be 'stand-alone compliant' with our rules and guidance",   the FSA warned in its summary of the review findings.

"Firms should not rely on subsequent promotions, communications or pre-sales systems and controls to correct inadequate disclosures in their financial promotions."

Detailed rules on advertising for financial products are set out in the regulator's conduct of business sourcebooks. The guiding principle, however, is that firms must take proper account of the information their clients need and provide it in a way which is clear, fair and not misleading.

The purpose of the independent review was to check the effectiveness of the FSA's routine monitoring of press, internet and television advertising and to help shape future strategy.

The external consultants carried out three annual surveys of financial advertising from 2007 to 2009, viewing a total of 1,160 print promotions and 300 websites. The 2009 review was based on a milestone sample of press promotions published between January and March 2009 and a sample of 150 websites.

Such was the effect of the recession on the mortgage industry, however, that the survey period for mortgage ads had to be doubled from three to six months to get a large enough sample.

Overall, the 2009 review found a high level of compliance, both in relation to press and magazine promotions and financial products being sold on websites.

Over the three-year period, press and magazine compliance increased from 72% in 2006 to 93% in 2009. The FSA says it is "pleased with this finding" but that the improvement may be partially due to a decrease in press advertising caused by the economic climate. It also notes a trend in mortgage advertising towards more generic, high-level promotions which are less likely to fall foul of the regulations.

Internet promotions, which were only included in the last two surveys, showed a slight improvement in compliance levels, from 83% in 2008 to 85% in 2009.  This, however, was based on a sample of only 150 websites per year which, the FSA recognises, "is not statistically significant given the volume of financial promotion on the internet". 

"Furthermore, we are disappointed that the review identified a number of issues related to prominence and balance that had been the focus of several previous communications on internet advertising," the FSA said. 

The review found examples of websites still "guaranteeing" that they could provide the cheapest insurance cover either without substantiating their claims, or using out of date information to do so. In some cases, example quotes were based on very specific criteria that would not apply to most customers.

Where promotions were unfair or misleading, whether in the press or online, it was usually because key information and risk warnings were poorly positioned or hidden in small print. In the case of websites, the review found it was still too easy for visitors to overlook or bypass key product information and risk disclosures before entering into the sales process.

Good website practice according to the FSA means making it impossible for the customer to buy the product from a landing page without first viewing key product information. The benefits and drawbacks of a product or its features should also be presented clearly and prominently, not buried in FAQs or behind a link which many customers will not bother to open.

The FSA would also like to see websites using fixed risk warnings, which would allow the information to remain on screen, even when the customer scrolled up or down. And the risk warnings themselves should be relevant and meaningful, not try to cover every possible eventuality.

The FSA will be carrying out another thematic review of internet advertising in 2010.