On November 4, 2022, the SEC's new marketing rule took effect. While this seems like old news because the rule has been on the radar for financial advisors for quite some time, it is now officially being enforced. And due to the extreme complexity of this 430-page rule, many financial advisors are still unclear on what exactly the rule means for them and their business.
On the one hand, this rule brings expanded marketing opportunities in the financial services industry for SEO that have been available to all other industries for decades. On the other hand, the new rule has some financial advisors concerned about remaining compliant with the new rule.
This is because aspects of the new ruling are retroactive, meaning that even advertising created and distributed before the rule went into effect must comply with these changes. And the SEC has promised to be diligent in examining financial advisor content and enforcing violations of the new marketing rule. And even those financial advisors who have not yet taken the plunge into featuring client reviews or testimonials in their advertising content need to pay close attention to all of their existing marketing efforts.
In fact, in a September 2022 Risk Alert, the SEC stated that “Advisers should consider whether they need to update or revise their written policies and procedures … to ensure they are reasonably designed to prevent violations by the advisers and their supervised persons of the Marketing Rule.” So financial advisors who aren’t compliant can’t say they weren’t warned.
What Does the Marketing Rule Change?
While the new rule has gained a lot of attention because of the addition of third-party reviews and testimonials, other aspects of the rule will affect nearly every marketing communication that financial advisors create and distribute. This directly addresses performance advertising requirements (i.e., how financial advisors use past financial performance to attract new clients via advertising). There are efforts being made to combat untrue or misleading implications, untrue statements, and other forms of disinformation.
Additionally, the SEC is placing greater emphasis on requiring financial advisors to keep extremely detailed records of all advertising efforts. This includes not only the advertisement and language used but also the performance of the advertisement, actual audience, and intended audience, as well as other granular aspects of a financial advisor advertising campaign.
In terms of financial advisor websites, there are some critical ways that financial advisors can remain compliant with the new SEC marketing rule:
1. Understand the rule and how it affects you specifically
Because the new marketing rule is the biggest change to the existing rule in more than 60 years, there is some confusion about how it should be interpreted. For financial advisors, the best course of action is to become familiar with the rule and the aspects that pertain to your specific financial advisor advertising practices.
And while all aspects of the rule are important, it’s very unlikely that any financial advisor has time to read and interpret 430 pages of SEC directives. Get to know the parts of the rule that will impact you the most and start there.
2. Do a complete compliance audit of everything.
And yes, that means everything, including all existing digital and offline advertising content, as it is subject to the terms of the new rule. This includes, but is not limited to:
- All website content
- Social media content
- Email marketing and communications
- Any third-party communications
- Testimonials and endorsements
- Any type of performance advertising
- Audio and video content
- Whitepapers
- Blog posts
- eBooks
- Recorded seminars or workshops
While this may seem tedious, it’s not something financial advisors can skip. After all, you or your internal compliance team should find any content violating the rule before the SEC does. Plus, doing content audits regularly is recommended, so this is a way not to duplicate your efforts.
3. Keep detailed records of EVERYTHING
Invoices and receipts are no longer sufficient when it comes to managing records of advertising efforts. In the new marketing rule, the SEC has upped the ante on the detailed documentation required to be maintained by financial advisors in terms of advertising efforts. The good news for financial advisors using online advertising platforms is that detailed reporting is available within the platforms.
Pro Tip: Don’t rely on all of your historical advertising reporting to live there in perpetuity. It’s a good practice to export all reporting, advertising creative, and all audience data at the conclusion of every campaign. This protects financial advisors from being able to access older data and creates an archive of previous campaigns that can easily prove compliance to any SEC examiners who may be asking.
Another area where meticulous record keeping is key is client reviews and testimonials. Because this is a new aspect of financial advisor marketing, it’s a safe bet that the SEC will be keeping a very close eye on financial advisor marketing content featuring such reviews and/or testimonials.
For that reason, financial advisors need to be able to produce documentation that establishes who the testimonial is from, their permission to publish it in an advertisement, any compensation they may have received, and proof of any statements or claims made in the advertisement being factual.
Also, financial advisors are recommended to consider the credibility of any third-party review sites collecting reviews.
4. Have a strong compliance team
There has never been a more critical time for financial advisors to put compliance at the top of their priorities. For some, this means hiring an in-house compliance officer. For others, that may mean enlisting the services of a digital marketing agency that is knowledgeable on compliance language and requirements.
Regardless of how a compliance team is established, the most important thing is that they’re diligent and understand the SEC's new marketing rule that it takes to keep financial advisors compliant. If you are looking to grow your business and reach potential clients in your target audience while abiding by the new SEC standard, then this should be at the forefront of your mind.
