What Every Financial Advisor Should Know About Compliance and Social Media Marketing
Hi, Dan Sheehan from Social Merlin back again for another Marketing Minute. Today’s Topic: “What Every Financial Advisor Should Know About Compliance and Social Media Marketing”
Social Media Marketing is an excellent way of reaching new prospects and nurturing your relationship with them. Almost 70% of professional service providers said that content marketing is their primary source of new leads; however, many financial advisors are still reluctant to leverage the power of social media. They find the minefield of regulatory compliance and record-keeping too daunting. The last thing you want is a fine from the SEC or a FINRA investigation as a result of non-compliance.
It may seem overwhelming, but there are guidelines that will simplify things for you. Let’s look at the latest revision to the rules governing financial advisor advertising.
The Securities and Exchange Commission (SEC) is making amendments to the Investment Adviser Advertisements and Compensation for Solicitations Rule. This is good news because it will be more principles-based and flexible to accommodate social media marketing. It will also allow advisors to share endorsements and testimonials on social media subject to certain conditions. The rule on solicitation will also be updated, which includes compensation for investor referrals. If you’d like to look at the new proposed rule, you can access it on the SEC’s website – Release Number IA-5407, dated November 4, 2019.
Not only does the rule expand the definition of what constitutes an advertisement, but the scope extends to include a variety of channels utilized by advisors to attract new prospects. The SEC has recognized that since the initial adoption of the rule in 1961, technology has changed the playing field significantly. The new rule also permits the presentation of financial performance with tailored requirements based on the target audience.
In the interim, we can follow some guidelines to stay on the safe side. If you are discussing your professional services and posting business-related content on your personal profile, it will be considered a business account.
- Make sure you publish your Disclaimers and Disclosures. You should have a standard disclaimer at the bottom of your website. Typically, your broker-dealer will require specific information to be listed, which they usually provide for you. If not, there are many free-copy disclaimers available to use. Make sure you include all the regulatory bodies you are registered with. If your advisory content is solicited from outside or third-party sources, you need to check the facts carefully and disclose the sources. You can, however, also include a disclaimer that you are not responsible for inaccurate information from third-party sources. Your disclaimer should be clear, concise, and easy for readers to understand. If you publish financial performance results, you need to include a disclaimer that “past performance does not indicate future results” with full disclosure of how the results were calculated.
- Be diligent with your record-keeping and conduct regular compliance checks. You need to keep time-stamped records of changes or updates to your website. WORM Compliance is a FINRA requirement to archive client communication in a non-rewritable format to ensure data integrity. Histories of social media communication must be retained for a minimum period of 3 years.
- Avoid promissory language when you promote the benefits of your services to clients. You cannot offer guarantees in your marketing content. It’s also important to avoid client specifics when you refer to examples or success stories. Protecting client privacy is of the utmost importance. Your posts always need to provide a fair and balanced view.
These guidelines apply to all your social media business accounts. The SEC also requires all Registered Independent Advisors (RIA’s) to disclose their social media accounts on their Form ADV. And don’t be wary of your Compliance Department, they are really there to help you. While I was actively working as a financial advisor I would often request an extra audit just to discover and pinpoint any deficiency I may have overlooked, which saved me a couple of times from doing something that may have caused me difficulty if I wasn’t alerted. Work with and use the services of your Compliance Department, it may very well pay benefits. If you follow these principles, you’ll have peace of mind that you can maximize the value of social media, without running into any regulatory compliance issues.
What’s your biggest marketing problem? Before you lose another ideal client get this and other issues resolved today by going to my website, socialmerlin.com, or click the link here now. You can also ask a question, make a comment or just get more information, and I will personally respond to you super-fast. Thanks, and see you next week.