FSA cautions against ‘risk sandwich’ promotions

The Financial Services Authority (FSA) has clarified what it expects from companies when they are promoting financial products and services.

The regulator’s finalised guidance on financial promotions, fund performance and image advertising notes the important role that advertisements play as a ‘shop window’ into a company’s products.

In its guidance, the FSA warns firms against serving a ‘risk sandwich’ – or presenting benefits, then risks, then more benefits – in its promotions as this tends to make them unbalanced and dulls the impact of important warnings.

Including attractive headline rates only obtainable by a small number of customers and relegating important information to the small print are other examples of unfair and potentially misleading promotional activity highlighted by the watchdog.

In addition, the guidelines cite research which claims customers tend to avoid products they do not understand, offering another reason for promotions to be clear and easy to understand.

“The content of a shop window not only tells you about the goods for sale; it speaks volumes about its business in its first contact with the consumer,” the guidance reveals. “Similarly, an advert’s content can offer strong clues as to how fairly your firm treats your customers.”