Anyone doing marketing in the financial services space must navigate the complexity of staying compliant. The damage (financial and reputational) that could happen to a firm that breaks the rules can be devastating.

The issue: Staying compliant is challenging. The financial services industry and other entities employ an intricate web of regulations imposed by various governmental bodies and regulatory authorities, and staying current with them can seem impossible.

This guide explains the complexities faced by people promoting financial products and services and what they can do to avoid reputational and financial trouble.

Financial Marketing Compliance: The Basics

Marketing compliance is the process of ensuring financial firms adhere to laws, regulations, and internal policies that govern promotional and communication activities. It ensures that marketing and communication materials are factual, truthful, non-deceptive, and transparent.

Regulatory bodies in the United States, including the Consumer Financial Protection Bureau (CFPB), Financial Industry Regulatory Authority (FINRA), Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) all have guidelines to protect consumers from misleading, confusing, or difficult-to-understand information about financial products and services in communications and advertising. States also regulate certain financial products and services, especially insurance. Regulatory agencies worldwide could also be involved in marketing compliance for firms that do business in countries outside the U.S. Plus, normal rules that apply to all forms of marketing, such as CAN-SPAM guidelines governing email apply to financial firms.

Common Financial Marketing Tactics

Financial institutions use many types of marketing and media channels to engage with potential and actual clients. Each has its unique compliance complications.

Digital marketing

This category includes:

• Paid and organic search engine marketing (SEM)
• Organic and promoted media
• Email marketing
• Webinars
• Display ads.

Many financial firms were initially reticent about digital marketing, but it is now central to most promotional strategies. Digital marketing is constantly evolving, and regulatory changes related to it can be challenging to keep up with.

Content marketing

Most financial companies use content, such as blogs, white papers, and videos, to educate prospective clients on solutions and services they may be interested in. This type of marketing is valuable for building trust. Producing completely compliant content is central to earning that trust.

Traditional advertising

Although digital marketing is central to most financial promotion activities, traditional methods like print ads, flyers, branch signage, TV commercials, and radio spots are still used, especially for localized marketing. With the primary focus being on digital, it’s easy for compliance errors to slip through in “simple” traditional marketing.

Event sponsorships and partnerships

Financial companies often sponsor local or national events or partner with organizations to reach a broader audience. Ensuring that sponsorship messaging aligns with regulatory expectations is essential for staying compliant. You also want to ensure you don’t spend sponsorship dollars outside regulatory limits.

Email marketing

Most financial companies use email marketing. It’s a great way to nurture leads and keep clients engaged with personalized updates, product offers, and educational content. Because it can be tightly targeted to specific individuals, email marketing is relatively easy for compliance experts to evaluate.

Referral and affiliate programs

While not common with traditional financial companies, fintechs and other emerging providers often incentivize current clients or third-party affiliates to bring in new business. However, these programs require careful monitoring to ensure they align with regulatory standards.

Texting, SMS, outbound calling, and robocalling

This ephemeral form of marketing is particularly challenging from a compliance perspective. In this case, a financial company performs outbound calling or texting to proactively reach potential or existing customers with personalized messages or offers. This direct approach allows representatives to address customer questions and concerns in real-time, making it easy for them to enter dangerous legal and regulatory territory.

Top Financial Marketing Compliance Risks

Marketing compliance risks in the financial services industry are typically related to the complexity of solutions, constantly changing regulations, and a wide range of marketing and communication tactics. Here are some key ones to look out for.

Misleading claims

Messaging that inflates benefits, minimizes risks, or uses unclear terminology or financial industry jargon can mislead people. Marketing materials and communications must accurately represent services and solutions without suggesting unrealistic returns or guarantees. Failure to do so can result in violations related to Unfair, Deceptive, Abusive Acts or Practices (UDAAP). This is a key issue for which marketers and compliance people should be on the lookout. Even minor, unintended errors can result in significant fines and reputational harm, not to mention the effort it takes to resolve the issue.

Inadequate disclosures

Regulatory agencies require specific disclosures for various financial solutions, including deposits, loans, credit cards, mutual funds, and investment services. These disclosures are supposed to help consumers better understand the financial solutions they are considering. Many may dismiss them as “the fine print.” However, missing or improperly formatted disclosures can lead to compliance violations.

Misrepresenting FDIC insurance

Mentioning FDIC insurance in marketing and communication materials requires careful attention to detail. Incorrect or misleading messaging about bank deposit insurance can have serious regulatory and reputational consequences. If a bank or fintech company gets it wrong, such as suggesting that non-deposit products are covered or that certain high-yield accounts are fully covered, it can cut into client trust. Errors can result in fines, greater scrutiny, and customer claims if deposits are lost and coverage expectations aren’t met.

Fair lending and non-discrimination

Marketing practices must avoid discriminatory practices. Today’s highly targeted campaigns are ripe for this. These campaigns could unintentionally exclude or discriminate against certain groups if not carefully planned, leading to potential regulatory violations. Fair lending is one example of this type of regulation.

Third-party affiliates

Relying on affiliates or referral programs for new business can introduce reputational and compliance risks. This typically happens when they do not follow the financial institution’s guidelines or contractual obligations. A financial firm can be held liable for affiliates’ deceptive practices. These relationships must be carefully vetted, managed, and reviewed regularly. Going into these partnerships without sound due diligence is a recipe for disaster.

Social media

Social media marketing in financial services presents unique compliance and regulatory risks. That’s because of the immediate, public nature of social media platforms. Social media is rife with misinterpretation or misinformation. Posts can rapidly go viral, amplifying errors or misleading claims, which could lead to regulatory penalties and reputational damage. It’s also easy for inappropriate messages to reach the wrong audiences. In addition, the casual tone typically used on social media may not be right for financial disclosures or what compliance professionals might be used to. 

Email marketing

Not all regulations governing financial marketing and communications are exclusive to the industry. Like other types of businesses, asset and wealth managers face significant risks under the CAN-SPAM Act if their email marketing and communication campaigns do not meet specific requirements. For instance, you must provide accurate sender information and a clearly visible unsubscribe option. Non-compliance with CAN-SPAM rules can result in significant fines, brand harm, and erosion of trust if recipients feel misled or spammed. 

Be aware: Each email in violation of the CAN-SPAM Act is subject to penalties of up to $53,088. Non-compliance can be very costly.

Telephone-related marketing compliance

The Telephone Consumer Protection Act (TCPA) is a U.S. regulation that restricts telemarketing calls, text messages, and automated dialing systems. Its purpose is to protect people from unwanted solicitations. Compliance with TCPA is crucial for financial institutions to avoid substantial fines, maintain customer trust, and ensure responsible communication practices.

Different financial products and services

Most wealth managers offer multiple products and services, sometimes to different types of clients. While this gives investors more options and financial firms greater opportunities, it presents challenges from a compliance perspective because different rules govern different investment solutions. A firm that also offers banking and insurance protection could also have to navigate regulations in those sectors. Add to that solutions targeted to sophisticated or wealthy investors, and the complexities can seem insurmountable.

The easiest way to smooth the compliance process is to partner with financial marketing content creators like those at Sondhelm Partners, who have significant industry experience. Many have compliance backgrounds and can help you negotiate with your compliance team to ensure approval while making certain your firm is fully protected. If you find your compliance team too inflexible, we can introduce you to one that is more open to discussion and negotiation.

Doing business in multiple areas

Compliance rules can vary depending on the market or jurisdiction in which you operate your business. Rules can — and do — vary considerably from state to state. And, as more and more asset managers serve a global client base, those with clients in different countries face even greater challenges.

Client base

Who your financial firm serves significantly impacts compliance. Regulations often impose specific requirements based on the audience’s characteristics, including factors like age or investor asset levels. For example, marketing to minors may require additional safeguards to protect them, while targeting wealthier people may make it necessary to follow regulations for accredited investors, which involve complex rules around determining investible asset levels and financial sophistication. In both cases, regulations help determine whether they know what they’re getting into before committing.

Different media platforms

Selecting the proper media channels for marketing initiatives is crucial for maintaining compliance in the financial services industry. Different regulatory requirements may apply depending on the medium and your message. For example, advertising through traditional channels such as television, radio, or print may be subject to specific content standards and disclosure requirements mandated by regulatory authorities. The same goes for digital marketing channels such as websites, social media platforms, and email campaigns, which are subject to their own set of compliance considerations.

Record keeping and audits

Financial and bank marketing compliance requires significant record keeping. Regular mandatory audits take place across the industry, making it critical to maintain complete records of marketing activities, including compliance and breaches. These records must also be available when audits arise. The ephemeral nature of digital marketing has made record keeping particularly challenging for financial services firms.

Marketing compliance rule changes

Financial marketing regulations constantly change to address emerging media channels, new marketing methods and financial solutions, and technological advancements. Another reason for rule changes is to keep up with bad actors in the financial services industry who want to game the system.

Working with knowledgeable compliance professionals and marketers experienced in the financial services industry, like those at Sondhelm Partners, can help ensure your marketing materials stay compliant even as regulations change.

Compliance technology

The content creation cycle is constantly increasing and getting faster because of the expansion of media options, the insatiable appetite for financial content, increased segmentation, and the fresh content required to meet search engine algorithm requirements. More and more firms are using technology to keep up with the faster and bigger content creation and compliance review processes, and it’s easy for errors to enter the process without proper training and careful use.

The Consequences of Breaking Financial Marketing Compliance Rules

Needless to say, breaking rules related to financial marketing comes with significant financial and reputational impact.

Because of the serious consequences of intentional or unintentional financial compliance misfires, regulators and the media take an unsympathetic view of them. When dealing with dollars or shares, a small error can lead to severe and lasting financial consequences for individuals, trusts, companies, and sometimes the broader economy (think the mortgage crisis). In short, the ripple effect can be enormous.

The massive impact breaking rules can have is why regulatory bodies make monitoring financial services marketing central to their agendas.

There will always be disreputable operators in the financial services industry who deliberately ignore or make questionable interpretations of financial marketing rules. Add to this the companies that don’t put in the time and effort to comply with regulations. These businesses and their directors can face fines that could run into the millions and lengthy suspensions. The penalties and suspensions are concerning enough to ensure financial companies stay honest and focused on meeting their regulatory obligations.

How to Gain Control Over Financial Marketing Compliance

A commitment to protecting consumers and maintaining industry integrity is central to staying compliant with financial services marketing regulations.

Avoid fines and reputational damage to your firm by keeping up with industry trends, undertaking regular training, engaging with regulatory bodies, collaborating with legal experts, adopting the right compliance software, and working with a marketing partner like Sondhelm Partners that specializes in marketing for financial firms and the compliance behind it. Doing these things will help you cultivate trust, fortify your brand, and be viewed as an industry trailblazer.

Schedule a meeting to discuss your compliance challenges with Dan Sondhelm and the team.