New SEC regulations allowing online testimonials for RIAs are set to go into effect on May 4. That will open up an all-new world of Web advertising for advisors who can negotiate the complex world of digital advertising.
That presents a problem for small RIAs that don’t have an in-house marketing team. And frankly it’s likely to present problems even for in-house marketers at the largest companies. The SEC rule, which allows for the use of client testimonials, requires threading a compliance needle in unchartered territory.
FMG Suite’s Samantha Russel, who creates digital marketing campaigns for financial firms, writes in Advisor Perspectives that the first step most RIAs should take is to optimize their “Google My Business” listing. That information-dense box that appears on the right-hand side of a search-engine result page is “a great catch-all for your firm’s information, including your address, contact info, business description, etc. But, most importantly, it includes your Google reviews,” she wrote.
The second step, Russel suggests, should be finding and claiming any existing reviews of your firm on sites such as Wealthminder or Yelp.
Optimizing for search and navigating review sites are easy lifts for the top, big-money companies. But small RIAs may wish to hire an agency or consultant to do the work for them.
More importantly, small RIAs need to invest in some legal expertise before running online testimonials.
Disclosure rules are particularly strong in the new SEC regs surrounding digital advertising, Leila Shaver, founder of My RIA Lawyer and legal and compliance partner at Myriad Advisor Solutions, told ThinkAdvisor that RIAs must be transparent about everything about everyone who gives a testimonial. “Who are these people? Are they clients? Prospects? Have they been paid?” If you give somebody a $5 Starbucks gift card or pay them in some way to provide a testimonial, ‘we have to disclose those things,’” she said. At the same time advisors must ““be very careful about identifying” clients and should get their consent first.
The new SEC rules are the first major change to the law on advisor advertising in six decades. GJ King, president of RIA in a Box, is concerned that the end result will be a further divide between large and small players.
“Smaller firms are not going to have the resources to hire big name celebrities for endorsements. There are also a lot of recordkeeping requirements that smaller firms do not have the resources to provide,” he told Financial Advisor.
Even big firms should proceed slowly in this new world, Max L. Schatzow, an attorney with the law firm of Stark & Stark, told ThinkAdvisor. Schatzow is particularly concerned that the SEC rules on the theory of “entanglement and adoption,” which cover the legal ramifications of linking to a review, are unclear.
