Article by Mhairi
We’ve often reported on private pension advice adverts being pulled up by either the Financial Conduct Authority (FCA) or the Advertising Standards Authority (ASA) for failing to provide clear information on the financial promotion being offered. Mostly these are online adverts, often including promotions by online influencers.
But recently the ASA has ruled in favour of an advert by Barclays which promoted their sustainable investments. It seems that they had received complaints saying that Barclays was not being clear about its own sustainability and whether it was meeting its carbon targets.
The ASA ruled that the advert didn’t need to make these statements because it was obvious to the target audience that the advert was talking about its investment products rather than its own performance. This was a good example of common sense being applied, which you don’t often see today. The ASA said that the audience for the advert was business people as the advert was run in the Economist which was targeted at an intelligent and financially literate audience.
Social Media adverts
The same can’t be said about online social media adverts of course. So called Gen Zer’s who are under 28 are particularly susceptible to these adverts, especially when it comes to private pension advice. In the latest survey by Dentsu, they found that:
- 45% of under 30’s had or were planning to open a savings account.
- 36% said that they expected their finances to improve.
- Although 80% thought the economy was in bad shape.
- 38% said that would consider or had bought shares.
- Over 50% were happy using an App to transact their finances.
- But 30% still expected good customer service as a priority and 27% wanted rewards for their loyalty.
- Worryingly though 33% said they were likely to invest in crypto.
Action Fraud have reported that almost £250 million has been lost to social media fraud over the last five years. Facebook is the worst offender closely followed by Instagram. In 2024 there were over 1,400 fraud reports made to the police from Facebook scams.
Artificial Intelligence
The acceptance of technology by the younger generation is likely to improve online safety in the future. Especially the use of Artificial Intelligence (AI). For example, the Pension Scams Action Group (PSAG) has recently launched an AI driven predictive tool to identify scam websites. So far it has reviewed over 800 websites and referred over 120 to the police with 30 so far being taken down.
But AI isn’t necessarily the answer across the board. At least not yet.
According to Smart Money, nearly 50% of customers said that the main reason they would change provider is because they couldn’t speak to a person. With 25% saying chatbots would make them move. I have sympathy with this point of view. I dislike chatbots. Mainly because you end up having to repeat yourself to an actual member of staff when you finally get through to them. So, for me, chatbots often just delay the customer service experience rather than making it easier.
But not everyone feels the same. The Financial Technology Research Centre reports that 8% of people actually prefer using AI or a chatbot. So that means that only 92% of people feel like me! However, there’s no doubt this will change as more and more Gen Zer’s come into the market for financial advice.
The Chartered Insurance Institute (CII) have responded to the Governments consultation on AI in financial services by recommending that providers are held accountable for any failings in advice and processes derived from decisions made by AI. I would agree that is a fundamental customer protection that is required in order to build trust in the use of AI. After all, customers can seek redress for mistakes made by advisers.
Financial Apps
Financial Apps area good example of the widening of technology in the market. But the FCA is concerned that the App providers are not being as diligent as they should be when it comes to checking their customers.
Many Apps offer some quite complicated investment options like Options, Futures and Fractional Shares. Whilst others offer some products which the FCA considers high risk, like crypto and Contracts for Difference. But it is not clear how the App provide screen their customers to ensure that they have the financial sophistication to use the App. Financial advisers are required to understand their clients’ circumstances before providing private pension advice for example and any recommendations to access certain financial products. Some of which are only appropriate for sophisticated investors. DIY investing carries with it a lot of risk and responsibility which some Apps don’t seem to be taking into consideration.
There are other financial Apps which are now offering guidance on money related matters and signposting users to product providers and advisers. Aila Money for example is specifically targeting financial advice and guidance for women.
Sophisticated fraud
With financial fraud now the #1 crime in the UK, private pension advice firms like ours have to be extra vigilant. It’s not just clients who are being targeted by scams, firms are to. There are a number of sophisticated scams which have been brought to light recently. Some of these involve fraudsters monitoring e mails and then using personalized client information to impersonate providers. This is usually in an attempt to entice firms into conducting fraudulent transaction like fund switched and pension transfers on behalf of clients.
Extra vigilance is required, with two factor checks put in place to confirm instructions. QR code-based transactions are particularly vulnerable and need to be treated with care.
Check the FCA register
Whilst we are rightly concerned about the advance of technology in financial services in terms of the risk of fraud, it doesn’t mean that old fashioned fraud has gone away. The FCA has recently charged an 85-year-old man with dishonestly misleading investors and running an unauthorized business. His company Financial Trading Strategies was offering a paid for trading advice service. It was unauthorized and the FCA suspects that clients lost over £1 million.
The simple way to avoid this type of fraud is to always check the FCA register to ensure the firm you are dealing with is authorised.
