The advertising standards imposed by Britain's Financial Services Authority are ignored by the majority of financial marketers, avers research published this week by international accountancy firm Grant Thornton.
The research claims that 76% of the 117 ads it examined failed to meet the standard imposed by the FSA. Not only did the companies concerned fail to supply the advertised deals, the ads made inaccurate comparisons and omitted to warn that share prices can fall as well as rise - a FSA requirement.
GT researchers made visits to branches of randomly selected banks, building societies and insurance companies, examining their on-site promotional literature. Ads on websites and in newspapers were also surveyed.
In all, ninety-four different financial services organisations were scrutinised in late 2005. Grant Thornton reports that some of the information provided was "wildly misleading".
GT partner Ian Gorham expressed surprise at the poor quality of the literature surveyed, commenting: "These flaws are driven by intense competition to attract customers, but the UK financial services industry has had enough recent scandals in areas such as pensions and endowments. Advertisers need to play by the rules and not exploit a lack of awareness among their target market."
Among advertisers' main misdemeanours were:
- Advertising "headline grabbing" deals or cheaper premiums which were not available in practice, with more expensive premiums quoted when the organisation was telephoned.
- Saying premiums were cheaper than a competitor's by comparing a basic product with a rival product that offers a more comprehensive cover.
- Using scare tactics such as 'one out of three people will get cancer in their lifetime', but failing to point out that some forms of cancer are not covered.
- Omitting obligatory warnings, such as income will be subject to tax or that values of funds could go down as well as up.
- Making claims that are untrue or unprovable, such as claiming products offered "the best rates" or "mortgage rates are at their lowest for years", when rates have risen since 2003.
- Using jargon to confuse consumers, such as MVR, LTV, IVA, CCJ and descriptions such as "core plus satellite".
In March, well before publication of the Grant Thornton report, the FSA talked tough, publicly at least, threatening action if such problems were not rectified.
Perhaps this hard-hitting report will now force the slumbering watchdog to translate talk into action?
Data sourced from BBC Online; additional content by WARC staff