Hello All! Welcome to another edition of the Financial and Professional Services team’s Friday Fiver. Big thanks this week to Dave Chambers, Peter Roberts, Rachel Griffiths, Matt Battersby, Helen Searle and Clare Coffey.
This week we look at the new ASA rules for corporate websites; the fairness of the ECJ ruling and its impact on insurance; the shortcomings of the FSA’s Retail Conduct Risk Outlook; Mr Murdoch’s acquisition of the remaining stake in BSkyB; the impact of the rising cost of children and what Charlie Sheen could learn from Bob Diamond.
ASA Is Watching You
On 1st March the Advertising Standards Authority (ASA), the watchdog for the advertising industry assumed new powers to regulate “companies’ own marketing claims on their own websites and in other non-paid for space they control“, as the UK Code of Non-broadcast Advertising was rolled out to cover online properties. The industry reaction has been mixed and there has been a good deal of chatter online about the impact this will have for companies, but it appears that the ASA will take a fairly collaborative approach in enforcing these rules. Regardless though there are plenty of website owners and social media moderators wondering what this means for them, plenty of lawyers doing their best to interpret and not much clarity so far. Certainly there will be a few social media moderators watching what they retweet or share on their Facebook pages.
Is this good for the industry? Probably and certainly for advertisers (and their lawyers) targeting children and young people. Is this good for the internet? who knows – it’s certainly not the free and unregulated space that it was before. One would assume that the originators of the 4,500 complaints that the ASA has recorded since 2008 will be happier. Though from the perspective of a PR man that has heard many times the exasperated cry that ’the ad agency just doesn’t get what we do’ I’d be surprised if the first adjudications have anything to do with the work of a PR agency.
Looking for a cheap deal…?
Women drivers braced themselves for the full impact of equality this week with the European Court of Justice’s ruling that men and women must be treated the same by insurers when assessing risk. According to the Association of British Insurers, women under the age of 25 could see their car insurance premiums rise by an eye-watering 25%, although men will pay slightly less than they do now. As we all know, despite the tedious jokes, women are statistically far better drivers than men and therefore a safer bet for insurers.
Show's Over Sheilas
But it’s not just the Sheilas who are upset. The ruling has drawn extensive criticism from all from all quarters, from Conservative MPs to consumer groups, to the unlikely (or so you might think) ABI themselves. Although their members might stand to gain from an overall increase in premiums paid to the industry, the potential disruption along with the marketing advantages of being able to offer competitively priced products, mean the ‘mistaken’ ruling is something they’ve been looking to avoid.
Also, the implications of the ruling are not just confined to car insurance. Dr Ros Altman predicts that the eight out of ten annuities currently bought by men (less relevant if you are a woman and likely to live longer) are also likely to take a hit as a result of the ruling.
All in all, there appear to be very few winners from this ruling, and gender could be the thin end of the wedge. As Catherine Barton from Ernst & Young points out in the Telegraph, there are many other ‘discriminatory’ factors currently being used to measure that may come under more scrutiny. So, the question is, when exactly does equality become unfair?
Less risky conduct?
This week the Financial Services Authority issued its first ever Retail Conduct Risk Outlook. Previously incorporated into the FSA’s Financial Risk Outlook which accompanies its Business Plan, the separation of conduct risk from prudential risk anticipates the FSA’s separation into two new bodies in 2012.
Conscious of recent conduct failures that have had a dire impact on consumers’ experience of financial services and products – Payment Protection Insurance (PPI) mis selling, unclear mortgage terms, and bank’s complaints handling to name a few, the RCRO is an attempt to mitigate and identify potential conduct failure in the future. However, reviewing the RCRO’s list of current issues, emerging risks and potential concerns it is striking how few of them are in any way new. Indeed, most of the risks identified are covered by work already underway as part of the Mortgage Market Review and Retail Distribution Review. Therefore it will be crucial that in identifying new conduct risks, the nascent Financial Conduct Authority must have the tools and powers to do more than shine a light on potential risks and be able to intervene early to avoid market failure. Failure to do otherwise will result in history repeating, albeit under the eye of an authority with a different name.
Rupert completes his Monopoly set….
Pass Go and collect £8bn!
Yesterday’s news that Rupert Murdoch will be allowed to purchase the remaining stakein BSkyB throws up a number of issues. There were two chief complaints made by other media outlets. One, that the deal impinges on the ‘plurality’ of media outlets in the UK by giving News Corporation a far larger stake against their rivals. As Andrew Neil argued, this increases their ability to cross-sell and to subsidise their loss-making newspapers, damaging the position of their broadsheet and tabloid rivals. And two, that the purchase of Sky News (albeit in a separate company of sorts) would mean a return to the ‘bad old days’ of the 1980’s when broadcast news was controlled by just two superpowers, the BBC and ITN.
On a day’s reflection, the first of these is likely to be a far bigger problem than the second, for which there is a strong counter-argument. Regardless of the influence Mr Murdoch will have over Sky News, it still represents a third news broadcaster and in that sense the picture is actually better than the ‘bad old days’ of just two television news outlets. It’s also worth noting that the deal is far from agreed yet – as The Times notes today, investors are queuing up to extract a high price from News Corp for their shares. And one final question as well – what does this mean for the BBC? News Corp has now become an entity twice the revenue size of the Beeb. Does that mean the constant pressure on Auntie to cost cut and justify the license fee will diminish?
Not tonight darling, we really can’t afford it…
There’s been a great deal of media coverage in the past couple of weeks on how much it takes to raise a child. LV
* in particular have both had a stab, putting the figure at somewhere between £210,000 and £270,000.
Interesting that Aviva reckons this is fundamentally impacting parents’ decision on whether to have more children or not. The report found that 66 per cent of parents would put off having more children because of financial constraints.
It’s a fact backed up by ONS statistics, which show that the once typical average family size of 2.4 children, made famous in the 90s TV Show… is now in fact 1.7 children.
The gloomy picture was reinforced by recent Markit Household Finance Index showed that more than third of households are feeling worse off in the last month, backing up the financial concern that could be literally constricting families up and down the country.
Why never fat cat actors?
Vanity Fair recently published their list of Hollywood top earners in 2010. Top of the list is James Cameron who earned $257m in 2010, mainly on the back of the phenomenal success of Avatar. Johnny Depp and Steven Spielberg were next in the list, earning $100m and $80m respectively.
These figures are so high they might make even the most hard nosed banker blush. So why were there no newspaper headlines slamming ‘greedy actors’ and ‘fat cat’ directors? Why do we accept high pay for some professions and not others? It might be said that, unlike bankers, actors have not harmed the world in any way but can we really say that about Jennifer Aniston who appears at number 25 in the list having made $24.5m in 2010? Anyone who believes that obviously hasn’t seen her new rom-com ‘classic’, ‘Just go with it’!
One actor’s pay has been making the headlines this week though as Charlie Sheen continued to self-destruct on US TV. Amongst the many revelations from these interviews came Sheen’s demand that his pay for appearing on ‘Two and a Half Men’ be increased to $3m per episode. This has caused some criticism in an America where many are still feeling the effects of the recent recession.
So could Charlie Sheen’s behaviour lead to more questioning of actors salaries and their benefit to society? If so, then perhaps they should look to Bob Diamond’s expert performance at the Treasury Select Committee in January for guidance on how to manage this scrutiny. Comparing some of his comments to those of Charlie Sheen this week, they could certainly do a lot worse!
Bob Diamond on banks apologising for the crisis:
“There was a period of remorse and apology for banks, that period needs to be over. We need banks to be able to take risk, working with the private sector in the UK.”
Charlie Sheen on not apologising for anything:
“I’m tired of pretending like I’m not special. I’m tired of pretending like I’m not bitchin’, a total freakin’ rock star from Mars.”
Bob Diamond on the perceived invincibility of banks:
“Banks should be allowed to fail…It’s not okay for taxpayers to have to bail out banks.”
Charlie Sheen on the perceived invincibility of Charlie Sheen:
“Dying is for fools, amateurs.”
Bob Diamond on bonuses:
“I would like to be able to isolate bonuses. I am a businessman trying to run a business. I have to balance what our owners want, what our customers want… I am aware of the emotion around bonuses and we will show as much restraint as we can…we are responsible citizens of the world and the United Kingdom.”
Charlie Sheen on pay:
“Blame the studio for giving me this much dough knowing who they were giving it to.”
More from Bob Diamond on bonuses:
“We have to balance the responsibility we have and the recognition of the environment we operate in”
More from Charlie Sheen on… well….. we’re not really sure
“I am on a drug. It’s called Charlie Sheen. It’s not available because if you try it, you will die. Your face will melt off and your children will weep over your exploded body.”
*Some great research from our client Aviva, but in the interests of transparency we should state that this is not our work