The regulatory agencies are developing policies that reflect the ways investors use the Internet to find and research financial advisors. It is about time, but the concerns are still there for manipulation and misrepresentation.
We strongly recommend you consult with your CCO before implementing any of the marketing tactics in this article. CCO’s will have different opinions on the impact of new regulations and how financial advisors can integrate new web-based tactics into their marketing practices.
All of these marketing tactics, when controlled by financial advisors, will require some level of disclaimer. In general, the main disclaimer will say: “The experience of one client may not represent the experience of all of a financial advisor’s clients."
Increasing numbers of investors are using the Internet, not only to find financial advisors but also to research them. This means they visit websites, Google search names, and visit the review sites.
The Internet creates a certain amount of control for investors because they can conduct their searches and research without disclosing their contact information. This anonymity is a huge plus for investors who do not want to be contacted by financial advisors until they are ready to schedule interviews.
It is safe to say, the Internet will become a more powerful tool over time. Covid may have accelerated investors’ use of this invaluable research tool.
Forms of Testimonials
There are four ways financial advisors use the feedback of clients to help validate the quality of their services. The implementation of these strategies will vary by advisors and their clients:
- Case Studies
Financial Advisor Testimonials
A testimonial can be as simple as a quote from a client that is published on a website or other venue that is visible to the investing public.
In an ideal world, the testimonial should not be solicited or influenced by the financial advisor.
On the other hand, positive testimonials may be a way for a very satisfied client to reward a financial advisor for his or her savvy advice and high-quality services. In this case, the comments in the testimonial are likely to be very positive.
On the other hand, this client’s experience may not reflect the experience of all of the financial advisor’s clients.
This issue may be mitigated by publishing three to five testimonials which may be more reflective of the financial advisor’s overall services and advice.
Financial Advisor Reviews
Reviews are supposed to be the most objective form of feedback for a financial advisor because the advisor has no control over them.
That is not necessarily true. Advisors may ask their best clients to submit reviews. They may even send links to these clients. These satisfied clients may want to help the advisors by producing glowing reviews that may not reflect the experience of the advisor’s typical client.
Positive reviews with four and five-star quality ratings are very valuable when investors use the Internet to research financial advisors. The more exceptional reviews the better because they can have a positive impact on the financial advisor's page rank in Google and the other search engines.
Financial Advisor References
What happens when prospects say: “Can I talk to a few of your current clients?” Very few advisors are going to say "no" - it could cost them the sale. Most advisors are going to respond positively by giving prospects three names and their contact information.
On the more cynical side, no advisor will provide prospects with bad references. In fact, references are carefully selected, some have personal relationships with the advisors, and some are coached to make the right comments.
Compliance officers are not fond of references because the information that is being exchanged is verbal and there is no written record.
Testimonials and Reviews should be considered as alternatives to references.
Financial Advisor Case Studies
Financial advisors should consider using case studies in their marketing. The best case studies will describe the experiences of actual clients. On the other hand, fictitious case studies, with appropriate disclosure, are better than no case studies.
The role of the case study is to give prospective clients something they can relate to.
The best case studies will describe the before and after experience of actual clients. Testimonials can also be integrated into the case studies.
The Control Issue
One of the biggest concerns of regulatory agencies and CCOs is the amount of control the financial advisors have over the use of these marketing tactics. They can ask their most satisfied clients to go online and submit reviews. Or, they ask for testimonials from the same clients.
They would never ask a dissatisfied client to do this. Full disclosure will be required because this level of control exists for all of the marketing tactics that are described in this article.
Only their best clients will be asked to provide a testimonial, act as a reference, or be a case study. Advisors may also send links to review sites to their best clients and ask them to provide reviews and make comments.
Financial Advisor Track Records
Very few financial advisors have track records that are audited and GIPS compliant. The sheer expense of producing a track record that represents the experience of all of a financial advisors’ clients is a major deterrent. Consequently using testimonials, reviews, and references as a substitute for a track record is a major concern for the SEC and FINRA.
Testimonials should not contain any references to performance. However, the investors leaving the testimonial could say the financial has more than met their expectations for performance without saying what those expectations happen to be.
Reviews may be more difficult to control, but advisors could send links to their best clients and ask them to post reviews. The review could contain some reference to the results that have been produced by the advisor.
Needless to say, this is a very sensitive issue that can create compliance problems for financial advisors if it is not managed properly.
The big issue from a compliance perspective may be the misrepresentation of information that is contained in testimonials and reviews.
On the one hand, financial advisors should not control what is communicated in testimonials and reviews. On the other hand, it is common knowledge that advisors can influence what is said when they encourage their best clients to produce testimonials and reviews.
The disclosure should offset any potential misrepresentation of information that is contained in the testimonial and review. Firm compliance officers may also require very explicit disclosures that are highly visible on websites, the Internet, and on collateral materials.