What's in this edition?
- FCA unveils radical changes to funeral planning sector
- Google shakes up financial lead generation
- Interesting links for you to read, watch and listen.
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FCA unveils radical changes to funeral planning sector
The ICO’s investigation into the funeral firm Avalon and the lead generation businesses Plan My Funeral and Impressia in 2019, uncovered that the funeral planning sector had a lead generation and boiler room sales problem. At the time, The Daily Mail covered the issue here.
The FCA stepped in last week and unveiled its latest consultation paper; it is preparing to bring the whole prepaid funeral planning sector under its direct - supervision.
We’re familiar with these rather dry looking consultation documents, but this one was surprisingly explosive!
Here are the highlights:
A ban on commission paid to intermediaries
To put this in context, a funeral plan is sold to a consumer for around 3-4k and a commission of between £500-£950 is paid to the firm selling the product. When you consider that advertising costs are much lower than other sectors like Mortgage and Insurance, it's no wonder that some firms have looked to make a quick buck. The FCA’s view appears to be that this level of commission encourages bad behaviour and they intend to limit it.
Cold calling will be banned
Under the proposed reforms potential customers can ONLY be contacted if they initiate the process and make an express request to be contacted, to mirror other sectors like pensions and investments. The FCA appears to recognise that all of the issues uncovered by the ICO didn’t go away with an ICO fine and many of the same protagonists responsible for poor practice simply set up new firms and started again.
Changes to solvency requirements for funeral plan providers.
One of the big question marks hanging over the whole funeral planning sector has been the concern that many plan providers can’t afford to pay out on every plan they’ve sold to date. In this latest consultation document the FCA proposes that a funeral product provider can only deduct surpluses (i.e. profit) from its overall trust if the trust’s solvency level is above 110% and this is signed off by the trust actuary. This would go a long way to limiting short term growth but would ensure longer term stability and consumer security.
What does all this mean?
Are there opportunities for legitimate lead generators and good salespeople? Put simply, yes.
If these proposals are passed, this is what we think will happen:
1. Funeral plan providers and intermediaries will actively seek out compliant lead generators.They know they will now need to work with firms who can certify that they comply with the new rules. There is a significant opportunity for good lead generators to work with the brightest and best funeral firms, as they prepare for these changes.
2. It's going to be more important than ever to be directly FCA authorised if you want to sell consumer finance leads in 2021. We think that the FCA are using reforms in funeral planning as a dry run for the sort of changes it wants to make to every financial promotion and sector in the UK.
3. These proposals will drive out the cowboys from funeral planning because these reforms will treat funeral planning like any other regulated product. They will encourage Life Insurance brokerages to add funeral products to their product lists because funeral product providers will seek alliances with directly authorised firms.
Google shakes up financial lead generation
If you generate consumer financial leads in the UK via search it's very likely that over the past 6 weeks your Google account was suddenly paused. Clients and friends of Contact State have been reporting back to us about the effects of Google's Business Operations Verification process as it swept through insurance, lending and retirement planning.
If you answered Google’s demands with enough detail the first time around it seems in most cases your account was live again within 48 hours. If you tried to cut any corners your first application was sent back to you to do better, with your account remaining paused until you did.
We don’t know of anyone who failed twice.
That seems strange given that this process was billed as Google’s big effort to clean up scam advertisers, you would expect one or two businesses to fail surely? It’s especially strange as you can still type in any number of financial search terms and see lead generation sites fraudulently misrepresenting financial products (as the consumer campaigner Mark Taber has pointed out here and here).
So what's going on?
We think Google was always less interested in verifying businesses on its platform and always far more interested in collecting information about advertisers to use at a later date. Google’s UK and Ireland MD, Ronan Harris wrote this letter to the FCA and outlined his approach. “Tackling bad actors who seek to defraud consumers is a complex challenge that requires a multifaceted response.”
We think Google’s Business Operations Verification process was a fact finding mission before the launch of the Advertiser Identity Verification process. This is now being quietly and slowly rolled out and is live for a handful of lead generators, chosen seemingly at random.
Here’s a good example of it in operation in Life Insurance advertising:
You can see that for this advert the consumer is given the choice of understanding why they are being targeted (which every search result has) AND more information about the company paying for the advert, in this case the lead generation firm, Free Price Compare.
If you click “about the advertiser” you get this additional detail:
So what happens now?
If Google really does roll the Advertiser Identity Verification process out to every single advert it displays, there are a number of things that we think are going to happen over a relatively short period of time:
- Advertisers who base their business outside of the UK to avoid tax are going to be significantly adversely affected. Why would you give your details to a business offshore? Stopping tax avoiders in this manner could be a big step forward.
- Lead Generators who use multiple companies and websites to double and serve search results will be more easily caught out by Google because of the details they’ve had to submit in the first process. Enforcing one advert per lead generator could unclog heavily congested sectors like Insurance advertising, bring down CPL prices.
- It will be much easier to catch lead generators misrepresenting the nature of their affiliation to a brand. Advertising campaigners will use this new capability to more clearly report advertising breaches to the FCA and ASA. It will be easier to prove for example that a lead generator has no right to mention a major insurance brand in their ad copy.
We’re still waiting to see the outcome of the FCA’s consultation on the new financial promotions regulatory gateway but there appears to be a good deal of communication between the FCA and Google; we think that's driving these changes.
As we’ve highlighted above there are still glaring gaps in Google’s ability and willingness to stop fraudulent lead generation but the steps being proposed and taken are positive and Contact State welcomes them.
Interesting links for you to read, watch and listen.
- The reform of the funeral planning sector is headline news and this piece by Faith Glasgow in the FT takes a different angle. There are many competing and vested interests vying for air time, large product plan providers pitched against brokers of funeral plans and its interesting to see the different perspectives.
- If you’re interested in the detail behind the identity verification changes that Google are making, Brian Heater of TechCrunch published this piece last month citing an internal google blog post and gives some wider context about how and why these changes are happening.
- Finally our friends at Lead Generation World have opened the signup for their debut UK focused conference. We’ve been looking forward to this event for a long time and we’ll be formally supporting it. Please give it a look, here.