Is it time to ease up on the "wealth warning" requirements on
financial services advertising? The IPA certainly thinks so - in a
document produced last week it argues that the practice, which was
introduced almost two decades ago to protect consumers, has become
hollow and meaningless.
Consumers have grown up since the 70s, when legislation was brought in
that forced financial advertisers to add all sorts of riders to their
ads, whether in printed or broadcast media. Back then, it was easier to
believe in an unscrupulous world in which intimidating insurance
salesmen preyed on feeble-minded, vulnerable consumers who'd sign
anything thrust under their noses.
We've seen swathes of red tape produced since then, especially in the
90s following all those pension mis-selling scandals. Not only are
financial services companies far more responsible, but they're also
guided by a myriad of rules and regulations giving consumers every
opportunity to change their minds. There are stringent rules covering
the activities of financial advisers and salesmen and there are generous
provisions for cooling-off periods once you've actually signed on the
dotted line.
The Department of Trade and Industry is now reconsidering the whole
issue and the IPA document hopes to nudge it towards a reasoned
judgment. It argues that wealth warnings are now in no-one's interest.
They don't actually protect the consumer, they hamper the marketing
strategies of advertisers and they hurt media owners - some more than
others.
Geoffrey Russell, the IPA's director of media affairs, says the
initiative follows up on a previous campaign by the Radio Advertising
Bureau. He states: "It has always irritated people in the radio industry
that a 30-second commercial could have 20 seconds of warning
gobbledegook at the end, usually delivered at breakneck speed. If it's
there to protect the most vulnerable in society why does it have to be
so impenetrable?"
Radio has been deprived of revenue totalling hundreds of millions
because of this. But wealth warnings arguably hurt everyone, even the
people they are designed to protect. There is research showing that many
consumers who, for example, would benefit from taking out an extra
pension, interpret wealth warnings as get-out clauses - small print
that, in itself, proves that the product is disreputable.
Russell adds: "The regulation has to be effective. A full explanation of
the product should be in the company's literature, in the point of sale
material, and in face-to-face interviews.
Advertising doesn't sell the product. All it can do is get people
interested - there are all sorts of statutory regulations and cooling
off periods where the sale of financial products is concerned."
One media owner that has been particularly frustrated about the
situation is Chrysalis Radio. So frustrated, in fact, that it recently
began a scheme whereby advertisers who have to use a warning are given
that "dead" element of airtime for free. Don Thomson, the company's
commercial director, says: "Radio has always been at a disadvantage to
other media when it comes to financial advertising because, although you
require a wealth warning on TV, it just gets put at the bottom of the
screen. This doesn't add to the length of the ad and it doesn't add to
the media costs."
Is the Chrysalis scheme paying off? Are increases in revenue more than
covering the free airtime? Thomson says it's too early to say, although
talks with the major financial sector advertisers have been
encouraging.
He adds: "We would certainly back the IPA initiative wholeheartedly. Our
view is that formal warnings are entirely appropriate at the point of
sale rather than on the advertising as such."
Nigel Mansell, the managing director of the outdoor specialist Concord,
recently published research showing that awareness levels had been
declining in the outdoor medium. One of the reasons for that is
creatives seem to have lost the knack of developing punchy
executions.
So surely he'll welcome any initiative that helps remove creative
clutter from the medium? "It does take up usable space on a poster - the
rules state that the warning must take up a substantial chunk of space
at the bottom - and it does impact on our ability to take revenue," he
admits.
"The point to me is not so much that it's gobbledegook - I'm sure it's
very well-meaning - but that no-one can read it unless it's a
cross-track 48-sheet on the Underground. No-one can take in the meaning.
It might have had some purpose when the financial services market was
relatively new but it's just nanny state now and, of course, it should
be abolished.
It's ridiculous. It restricts the ability of financial advertisers to
get the best out of outdoor and it is an unnecessary hurdle for those
thinking of using the medium."
Of course, you could argue that the advertising industry is in no
position to take the moral high ground here, what with so many dodgy
loan sharks running direct response ads on TV - but that, arguably, is a
whole different issue. The more you look at wealth warnings, the more
pointless they seem.
But what impact would their demise have on the media market? Would
financial advertisers seriously review their strategies?
This is true to a certain extent, Keith Moor, the head of marketing
communications at Abbey National, admits. He comments: "As wealth
warnings currently are, they're just confusing, so any initiative that
helps will be welcome." Perhaps surprisingly, though, he doesn't feel
they should be abolished completely. "We don't believe that they have to
be abolished but they should certainly be more straightforward. They
should be simplified and shortened. That would clearly be in the
customers' interests. I think they should say merely that before you
buy, someone will talk you through this."
Moor adds: "Consumers still need to be told they will be protected. When
you buy a financial product you never do it straight off the ad. That's
what wealth warnings don't take account of. They date back to a time
when there was less effective self-regulation in this industry."
But what about the budgeting and media strategy implications? Yes, there
would be some, Moor admits, but it wouldn't necessarily be a case of
winners and losers. "In the past, wealth warnings have meant that we've
used less outdoor and less radio and, on certain subjects, less TV.
We've certainly had to change our approach creatively on TV because of
the need to carry warnings. If things changed we might not shift budget
from one medium to another, but we might be tempted to spend more," he
states.
