Is it legal for a financial adviser practice to cold call in order to find new clients?


This is a question I am frequently asked by advisers wanting to expand their practice. I suspect that many other advisers do not ask the question as they think they already know the answer is “no”!The reality is it IS legal to cold call as long as you do it properly. Doing it properly, though, can be a minefield unless you know exactly what you are doing. If you get it wrong you could find you are committing a criminal offence, which would not be very helpful to your practice! Get it right, and this can be a great way to expand your practice.

Selling Financial Products
Cold calling to sell a financial product is illegal in most circumstances. You can do so as long as it is clear the product is a generally marketable packaged product, and that the product does not have any higher volatility funds or links to higher volatility funds. There are a lot of potential traps for the unwary here, so even if you believe what you want to market falls into this exemption it is probably best to avoid doing this at all.
Bear in mind that the prohibition here is not simply on trying to sell such a financial product over the phone. It is also illegal to begin the sales process over the phone and then continue it when you meet the client. For further information on this, see COBS 4.8 in the Financial Conduct Authority Handbook. I do not see this as a problem for most financial advisers though, as what we should be doing is finding out where our client is at and what he or she wants to achieve before we even begin to think about products.
Selling Your Services
The correct way to cold call in the financial services arena is simply to introduce yourself and the range of services your practice can offer. Your purpose is not to sell a product but to arrange a meeting so you and your prospective client can see if there is potential for an ongoing professional relationship. This is both legal and ethical. In theory, this sounds simple. In practice, though, you still need to tread carefully..
The first step is to get the right list of people to call. This will almost certainly require an investment. Do not think you can simply call people using the white pages or yellow pages. These directories are not provided so that people can cold call. If you get caught using them in this way you could find yourself being sued by the list owner.
Telephone Preference Service
Having obtained your list you must exclude anyone on that list who has registered with the Telephone Preference Service (TPS) or, if it is a business rather than personal number, the Corporate Telephone Preference Service (CTPS). In some cases this will have been done for you already by the list provider. That is fine, as long as you keep evidence on file that this is the case. For example the contract may specify they must either delete TPS and CTPS numbers or indicate which numbers are registered. Bear in mind that registration with TPS and CTPS can occur at any time. It is no good buying a list which excludes TPS and CTPS numbers and then expecting to keep using that list for the next two or three months. If you call someone more than 28 days after they have registered you will be committing an offence under the Privacy and Electronic Communications (EC Directive) Regulations 2003 as amended by the Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2004.
If you are relying on a list provider to keep the list free from TPS and CTPS numbers you should therefore only rent that list, not buy it, and make sure it is refreshed at least every two or three weeks. Alternatively you can do the TPS and CTPS checks yourself. You can do this online for free if you are happy to enter the numbers manually one at a time, or you can pay to have your entire database checked. Remember to keep a record of how and when you did this so you can show the Telephone Preference Service or the Information Commissioner’s Office you did so if someone complains.
If you fail to do your TPS and CTPS checks properly you can be fined up to £500,000. You will also find the Financial Conduct Authority (FCA) will look very dimly on your practice and may withdraw your authorisation.
Suppression List
It is not only people who have subscribed to TPS or CTPS who can report you for calling them illegally. Anyone has the right at any time to tell you they do not wish to receive calls from you or your organization. You are then legally required to follow this instruction.
Clearly you cannot be expected to rely on your memory for this! You must therefore keep a list of numbers not to call.
It is no good simply deleting the number from your list. When that list is refreshed you may find the numbers you must not call appear on it again.
Make sure you have a good system in place for maintaining your suppression list and using it to delete those numbers from your call list so you never make the mistake of calling someone who has specifically told you not to call.
When to Call
You are only allowed to call during reasonable hours unless the person you are calling has specifically asked you to call outside these hours.
“Reasonable hours” is not defined in the regulations and you should therefore use common sense. Clearly it would be inappropriate, for example, to call at 6 am or 10 pm unless you had specific permission to do so.
What to Say
At the start of your call you must identify who you are, the firm you represent, and the reason for your call. You must then ask for permission to continue the call. It is very tempting to ignore all this, as the majority of people you call will hang up or tell you they are not interested the moment you do so. Do not ignore it, though, as it is a legal requirement. You will be in trouble with the FCA if you do ignore it.
Assuming you can continue the call you should clearly use a good “hook” to gain the interest of the prospective client. For example, you may ask if they want to see if they can reduce the cost of their insurance, or reduce the charges they pay on their investments. It is OK to use a hook like this, as long as you also make clear that the purpose of meeting them is only to introduce yourself and outline the range of services you can offer.

Do not try to begin your fact find over the telephone, even though you may be tempted to do this so you can identify whether this prospect is likely to be a suitable client. If you do begin fact finding this means you have started the sales process, and if the sale ends up being a financial product which is not exempt under COBS 4.8 you will have broken the law.
First Meeting
This is not, of course, part of the cold call, but it is important your first meeting with the prospective client follows the principle you have already established. It should only be a meeting to introduce yourself and outline the range of services you can offer. Again, do not begin a formal fact find at this meeting, although clearly you will be taking note of everything the prospective client says which will help you in the “know your client” process.
Finally …
Be ready to take a lot of rejection. Ideally get someone else to do it rather than doing it yourself, as the accumulated rejection may well put you in a negative state of mind when you finally meet your prospective client, and if it does then you will almost certainly fail. Maybe one way to do this is to employ one or more telesales staff. If you do, make sure they are very well trained so they do not break any of the rules, perhaps unintentionally.
Cold calling is a very useful weapon in your armoury of marketing strategies. Use it carefully so you avoid the many traps for the unwary, but use it well and it will really help you build your practice.
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