As I discussed in my last post, there are huge benefits to be accessed by producing a regular investment newsletter. Clients want to be kept informed, and a newsletter is a cost effective and engaging way of doing so. However, staying connected to clients by written communication doesn’t come without its perils. Here I look at how to avoid the common mistakes made in the production of investment newsletters.
Regulatory guidelines for your investment newsletter
Whether you’re regulated in the UK, the United States, Canada, or elsewhere, there are some general principles when publishing any material and sending to clients (or potential clients). In essence:
- Whatever you publish might be construed to be advertising (even if that isn’t the intention), and
- Will be treated differently under the regulations depending upon the audience (e.g. private clients or market professionals)
The law that regulates this in the UK (the Financial Services and Markets Act 2000 – FSMA) covers shares, options and futures, CFDs, investment funds, pensions, bank accounts, and insurance products. Credit and loans are covered by a different law, the Consumer Credit Act. The rules relate to:
- The requirement for financial promotions to be clear, fair and not misleading;
- The provision of specific detailed information in communications to persons who fall in the Retail Client category;
- The provision of prescribed statements and warnings when past, simulated past and future performance is described; and
- The provision of specific information when a direct offer is being communicated
You’re also restricted by the rules on cold calling (and in relation to investment newsletters, this means that you must have permission to send to the client).
The big pitfalls
There are a number of pitfalls that advisors fall into when producing an investment newsletter. (Click to tweet)
- Not complying with the disclosure and disclaimer requirements when reporting on performance of a financial product
- Crossing the advertisement violation line when reporting on the performance of their previous recommendations
- Discussing the advisor’s specific achievements (e.g. awards received)
Whenever you write about any of the above, you’ll need to be specific. For example, the time period of performance measurement must be clearly stated, and if the performance is benchmarked what the benchmarking criteria are.
5 Tips to Keep Your Content Compliant
Whether your newsletter is a single page email or a glossy printed publication, you’ll need to avoid non-compliant content. Here are five tips to maintain compliance when communicating with your clients:
Assume it will be read like an advertisement
Okay, so you and I both know that’s not the aim of your newsletter (and it certainly shouldn’t be), but the regulator will assume it is and so should you. Avoid quoting favourable comments and making specific recommendations.
Don’t make the newsletter a sales pitch without getting sign-off
If you end the newsletter with a call-to-action such as asking that clients recommend your services to friends, then it most definitely becomes an advert. This isn’t to say you can’t do so, but if you do then you must get your compliance officer to sign-off on its content.
If you send a newsletter to a prospective client (for example via an email promotion or via a sign-up on your website) then it automatically becomes an advertisement.
Don’t forecast the future
It’s natural to try to calm client fears when markets are volatile, but in doing so you must avoid making specific claims or use words or phrases that might be construed as guarantees. Choose your words with care and make sure you include those important disclosures and disclaimers (for example, the old chestnut that ‘markets go down as well as up’).
Avoid commenting only on your winners
It’s so tempting to forget the bad recommendations you made or the funds that haven’t performed so well. That’s why the rules generally forbid you to reference specific recommendations that were profitable to any person.
Run your newsletter past compliance before passing to clients
This is the final check. If your compliance officer says it’s good to go, then it’s good to go!
General content is better than specific content
When it comes to an investment newsletter, remember why you are sending to clients:
- It helps to build the advisor/client relationship
- It’s informing and educating
- It encourages engagement and contact for advice
Your clients want to be ‘kept in the loop’. They want to know about the economy, markets, and other areas that interest them. But they won’t expect you to make specific recommendations. Think about it: your client deals with you because he or she trusts you to advise him or her personally. So an investment newsletter’s content should be general and not specific.
Written well, your newsletter will speak to your clients personally, but won’t give personal advice. That’s a difficult balance, but when you achieve it your results will skyrocket.
Next time we’ll look at more tips on writing a great investment newsletter.
Blogs in the investment newsletter series
How to Create Your Investment Newsletter Template