FCA's social media guidelines – expect a damp squib

UK financial services are holding back their investment in social media pending new social media guidelines from the UK regulator. But will the long-overdue update be little more than a damp squib rather than the panacea the £63bn sector is hoping for?

The vast regulation that surrounds the industry is a clear deterrent to financial services firms adopting a holistic and proactive approach to social media, with many financial marketers citing fear of falling foul of the Financial Conduct Authority (FCA) rules as a key barrier.

Fearful financial services firms swerving social media

At a recent Social Media Leadership Forum (SMLF) panel that I attended – along with Financial Times associate editor Andrew Hill and a senior associate at the FCA, Richard Lawes – all but a handful of attendees admitted they were afraid of using social media; surprising, given how pervasive social media marketing has become for marketers across most industries.

In large part, this is due to UK financial services holding off adding social media to the 'traditional' marketing mix until the FCA clarifies its position on what firms can do and say on social platforms. Marketers are hoping for more detail than the original guidelines and they want the FSA to illustrate what it considers is and isn't good social media practice in the sector.

To sum it up, they want a bit of reassurance and hand-holding. And who can argue? After all, the risk of getting it wrong could land the firm with a hefty fine from the FCA if they are found to have breached its financial promotion rules – and the reputational damage that comes with that.

The financial regulator and social media

Let's get one thing straight; the regulator is not anti-social-media. In fact, the FCA itself has a Twitter account (@TheFCA), proactively uses LinkedIn and in its January 2014 'Regulation Round-Up' sought feedback from users on "which other social media you think we should use". However, the last official update about social media compliance from the FCA was in June 2010 – back when the first iPad was sold and just after the pinnacle of Bebo and MySpace.

The updated FCA social media guidelines were originally expected in Q1 this year, then postponed until "summer 2014" and most latterly expected to be published in August – but financial services may have overhyped its contents and the FCA must now manage expectations.

First off, the publication of the guidelines is just the first step, to be followed by a three-month consultation process to promote a "two-way dialogue" between itself and the firms it regulates. Secondly, and most importantly, it looks like there will be no social media hand-holding from the regulator.

Neil Gregory, digital engagement specialist at the FCA, told the Direct Marketing Association's Financial Services Council on 2 July not to expect prescriptive rules or guidance from the FCA's update on social media use. Instead, we are likely to see the FCA expanding its high level supervisory approach to more clearly encapsulate social media in the financial marketing mix. So if you were banking on a step-by-step guide to what you can and can't do on social, you will be disappointed.

So what is the FCA actually saying right now?

Speaking at SMLF, the FCA's Lawes said: "The FCA can see positive benefits from using social media but there is an element of compliance". Primarily, he said everything firms do on social media must ensure "customers are at the heart of your business".

He also said the FCA accepts compliance requirements can be a burden, particularly when social platforms have restricted character limits, such as Twitter. "We are aware of the Twitter space constraints and aware different media have different constraints, such as billboards, radio, TV," he said, advising: "You should frame your message and content to the medium you're using. Think if the content or message is appropriate to that medium. Use the medium that allows you to be compliant."

Perhaps a bit of cheer can be found in the fact that no fines or enforcement action has been taken by the watchdog for bad social media practice, and this update to its guidelines is purely at the behest of authorised firms themselves. Theoretically, this should encourage financial firms not to wait for a golden go-ahead from the FCA, but to take the same measured approach to social media as they do with all other communications.

Written by Sharon Flaherty, founder of BrandContent. Follow Sharon on Twitter @BrandContentUK. Additional reporting by Anna Lawlor, co-director of Social i Media, tweeting @SocialiMediaUK