By Thomas Brett, Head of Loans and Mortgages at contact status,
Recent changes coming soon Online security bill marks the final step in a tightening of the regulatory regime for online financial services advertising. Thomas Brett, head of mortgages and loans at contact status explains how new financial promotion rules put in place by government and big tech are likely to affect large designated representative (RA) networks – and how new digital compliance solutions can help businesses stand up to scrutiny increased regulation.
At Contact State, we have closely followed the new ad verification rules introduced by Google, which means that anyone advertising financial products will need to be registered with the FCA or use the FCA number of a registered company. This is, in most cases, the primary buyer’s FCA number.
This is a big step forward in ensuring that customer journeys are as safe as possible. By ensuring that the primary buyer is also responsible for compliance and monitoring of advertisements seen by the client on their way to regulated advice, ensures full liability of those who engage in fraudulent revenue generating activities leads and avenues of support for consumers who are victimized. .
While social media sites are also hot on the heels of Google to introduce rules requiring lead generators to be regulated or work with a regulated company, the FCA and ICO close the loopholes that have traditionally been used to generate leads less expensive and less compliant for sale. on.
Whose responsibility is it anyway?
Yet, as these new rules come into force, they highlight a potentially huge “blind spot” in the financial advisory industry. Large AR networks of financial advisers and mortgage and capital release specialists charge for membership, which in turn covers compliance monitoring and insurance costs, allowing advisers to work in regulated environments under the network FCA number. Any fraudulent activity in the customer journey puts the network at risk of breaking regulator rules, damaging its reputation or, worse, facing heavy fines.
The ICO also started focusing on the lead generation space in the first quarter of 2022, and we can expect these rulings and fines to increase in volume as the year progresses. A recent example five companies have been fined a total of £405,000 by the ICO for making unwanted phone calls to elderly customers without permission. Without monitoring at every step of the process, networks cannot prove that they have this permission.
The tip of the iceberg for ARs
This in turn means that there is a potentially large number of lead generation companies working under a network’s FCA number without their explicit consent or, more importantly, their monitoring of ad campaigns and landing pages. With some networks estimated at over a thousand ARs, the scope of this latest regulatory challenge is significant.
the FCA Consultation Paper estimates the number of ARs in the UK at 40,000, so this early attention might just be the start. Indeed, the stakes could rise if the FCA and ICO seek to clamp down and punish violations at the network level, or investigate further once a non-compliant landing page is discovered.
A threat from top to bottom
More oversight and due diligence will be required by AR networks to ensure they are fully covered and their customers are protected. However, this will require significant effort and investment of time and capacity, as lead generators can use over 50 different landing pages and journeys for each campaign.
The knee-jerk reaction would be to ban RAs from using external marketing campaigns to generate leads, but that will remove a large and integral part of many advisors’ business and lead streams. This is not the answer, especially when there are other options available to ensure lead generation can occur in a safe and compliant manner.
Full transparency is possible
There are now new compliance-focused digital solutions developed specifically to address these regulatory challenges. These allow AR networks to establish end-to-end visibility into all vendors and campaigns used for their members. Therefore, only approved and fully compliant landing pages can send leads to their ARs. Many of these solutions also support quarterly audits run directly in the risk team, providing proof that they work hard to ensure that all customer journeys are safe, compliant and pose minimal risk – from start to finish.
A compliant future for AR networks
Outside of industries such as financial services, FCA regulation is also expanding to tackle issues in sectors such as funeral planning. As scrutiny tightens across the board, networks will need to implement digital solutions to simplify the compliance process.
Acting to digitize monitoring and compliance operations at the earliest possible stage will help provide peace of mind for network managers and their ARs, marking a major shift away from compliance uncertainty and the old burden. manual reviews and confirmation.