Think of brands that do outstanding direct marketing and who comes to mind? Whoever you put on the list, chances are it will be short on financial services providers. With the possible exception of First Direct, it is fair to say that great DM and insurance, loans, credit cards or savings and investments are not familiar bedfellows.
One of the prime reasons for this is compliance. Almost the first thing you notice in a DRTV spot, press ad or direct mail pack in this sector is the small print. Like the health warnings on cigarette packets, the impression is sometimes of the brand waving from behind a danger sign.
This may begin to change as a result of the new regulatory environment being introduced from November 1 by the Financial Services Authority (FSA). Instead of a constant battle between direct marketers and in-house compliance officers over every word and message, a more collaborative approach may start to produce better creative work.
“The new regulations should be less prescriptive than before,” says Eric Austin, direct marketing consultant and chairman of the DMA Financial Services Council, who has spent most of his career client-side in this sector. “The dilemma in the coming months is how the FSA will treat them as a principles-led set of regulations, rather than as a set of rules.”
The new regulations, known as “Treating the Customer Fairly”, mark an important shift in approach, as Austin notes. From setting down precisely what can and cannot be stated or claimed as part of a financial promotion, as the authority calls all aspects of sales and marketing, it sets out the principles that need to be acted on. But Austin is wary, “There is a worry because principles are always open to interpretation,” he says.
It is the interpretation factor that could lead to a creative break-out as agencies and clients test the rules. There could be a transformation in thinking about how to market financial products.
According to a spokesperson for the FSA, under Treating Customers Fairly (TCF), “the starting point for financial promotions is still the requirement to be fair, clear and not misleading. When reviewing a promotion, as well as identifying technical breaches, we look to see what message it conveys as a whole. And when contacting firms, our focus is on the principle that has been breached, rather than on the detailed rules.”
This outcome-focused approach to regulation means that direct marketers need to consider how the whole of their message reads. Instead of seeing compliance as the small print, which fills several pages of a leaflet, every headline and word, the tone of voice, and the delivery of the proposition in an ad needs to be right.
“We believe that our new regimes for financial promotions, combined with our TCF initiative, will allow for more flexibility and creativity in financial advertising,” says the FSA. “For example, we no longer prescribe the exact wording to be used in risk warnings.”
With prescriptive regulations removed, financial services providers and agencies can now explore a wider range of creative solutions. One company that welcomes this shift is Norwich & Peterborough Building Society.
“We have always upheld those principles as part of our brand. It is about making those values work for you, rather than seeing them as a challenge,” says Debbie Penton, marketing director at N&P.
She believes the process of compliance has to start at product level, identifying which would suit the customer. “We spend a lot of time talking to customers about how we can meet their needs. We want customers to feel they are in control, but guided the right way by us,” she says.
This journey opens up opportunities for delivering regulatory warnings at different points, rather than having to drop them on a customer all in one go. “We don’t treat our direct marketing as an attempt to close a sale. It is a prompt that a customer might want to think about their mortgage. The sale is done through a series of stages,” says Penton.
One of the most significant shifts under Treating Customers Fairly should be to change the way campaigns get developed. Instead of coming up with ideas, then watching them get stamped on or nibbled away by the compliance team, a more collaborative approach should emerge.
As the FSA’s spokesperson says: “The compliance function within firms will need to be up to the task of standing back and judging for themselves whether promotions are fair, clear and not misleading. This may mean that staff need to know more about the product or service, who it was designed for, and how and to whom it is being marketed. Equally, the marketing function needs to know more about – and work closely with – compliance.”
Just as creative teams have increasingly taken on board customer insights and recognised that these enable, rather than limit, creativity, the same needs to happen with compliance. The skilled will be able to absorb the new principles and think compliantly, while still retaining their edge.
The creative challenge of the new regulations continues to be how to get attention while still providing risk warnings. Brands that embrace this as a culture, rather than a duty, will emerge as the winners.