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What Financial Advisors and RIAs Need to Know About The SEC Testimonial Rule

There’s no doubt that every financial advisor has read about the new SEC marketing rule that relaxes the decades-long ban of using testimonials and reviews in financial advisor marketing. 

Known as the “Marketing Rule,” this development has many financial advisors excited about the opportunity to market client testimonials as a way to build their online reputations, credibility, and trustworthiness.

Read on for recommendations for financial advisors and RIAs that want to integrate testimonials, ratings, and reviews into their marketing.

 

Why Do Testimonials Matter?

Human beings are social creatures by nature, and hearing about the experiences from people they know or don’t know can have a major influence on their willingness to give up their anonymity and initiate contact with financial advisors. Perhaps a testimonial is a tipping point for investors who are seeking financial advisors they can trust. 

At some point in the not too distant future, financial advisor testimonials will define the haves and have nots. If a financial advisor has multiple positive testimonials, they can create a competitive advantage that results in more qualified leads, prospects, and clients.

This form of social proof can only be achieved by sharing real-life client experiences.

Testimonials will be more important when financial advisors deal with the next generation that came of age using the Internet and social media for information. This is their primary source of information that helps them make the right decision when they are seeking financial advisor and services. However, the need for a human connection isn’t completely replaced with technology, and testimonials can fill that need for those looking for a “person” to help them screen financial advisors before they contact them. 

Having testimonials and reviews online – both on a financial advisor website and 3rd party platforms undoubtedly enhance SEO (Search Engine Optimization). When popular search engines such as Google see positive instances of a financial advisor or RIA being mentioned online, it can reward their sites with better placement in organic searches. 

 

How Can Financial Advisors and RIAs Take Advantage of the New Ruling?

Set Goals

Before getting started leveraging testimonials, it’s important to have a clear plan that outlines goals and establishes a plan of action. While featuring reviews and testimonials can accomplish several marketing goals, starting from the most important and working down is a good way to know where to get started. For some financial advisors and RIAs, the main goal is to create new leads they can talk to. For others, the objective might be to build brand awareness and a reputation for trustworthiness and expert advice.

This level of trust is more important when investors are replacing financial advisors.

 

Solicited vs. Unsolicited Reviews

Under the new SEC rule, financial advisors and RIAs are permitted to ask for or “solicit” testimonials and reviews on certain platforms. However, keep in mind that there’s little to nothing that can be done by the financial advisor when it comes to unsolicited reviews and when/where they might appear online. While SEC guidance on unsolicited reviews is still being determined, it’s recommended to focus on solicited reviews and on the platforms where they are permitted to appear.

 

Decide Who to Ask for Reviews

While possibly uncomfortable at first, asking for reviews is a key piece of taking advantage of the new ruling. Before asking for reviews, there are some key conditions set forth by the SEC such as asking all clients, not just the best clients (this is to avoid “cherry-picking” by only asking the best/happiest clients) and not asking for a positive review so advisors are influencing the outcomes. 

Additionally, some financial advisors could choose to ask non-clients for reviews as well. For example, a local CPA, estate planning attorney, or another type of Center of Influence. These can serve more as character references and are permitted with this new ruling as long as the appropriate disclosures are included when publishing or promoting these testimonials.

 

Consider Where to Share Testimonials

Taking full advantage of this new rule is so much more than simply sharing on a financial advisor website. By providing testimonials via other channels, adds more validation to the testimonial for both users and search engines that link back to financial advisor content. 

There are many places these testimonials can be published, and the SEC rules vary depending on the platform’s policies. These 3rd party platforms can offer a much broader exposure for financial advisor and RIA testimonials. 

Before deciding on the platform, advisors should become familiar with the specifics of the platform and if adequate disclosures can be used to meet the requirements of the regulatory agencies. Social media can’t be left out of this conversation. 

In fact, for some financial advisors, this new rule has opened up a whole new world of online promotion via social channels. As usual, the SEC has rules and regulations regarding this type of sharing and promoting testimonials, and some social platforms (namely, Twitter) don’t support the character count required to display appropriate disclosures. 

For some RIAs, it will be beneficial to do research beforehand to come up with a testimonial strategy solely dedicated to social media promotion to take full advantage of the benefits. 

 

Promote Reviews Offline

While online channels are an important part of any modern financial advisor’s digital marketing strategy, there are offline channels that can also leverage the promotion of online reviews and testimonials. 

Examples of this include print advertising, billboards, postcards, or perhaps even on the back of a business card. Reviews can also be promoted via recordings such as radio ads and podcasts, assuming the proper disclosures are also included in the feeds.

 

Compliance 

While it should be no surprise that with the new rule comes new compliance rules and disclosures, financial advisors need to be cautious when they use a new marketing tactic that speaks to their competence and trustworthiness.

A testimonial or rating is not a substitute for a track record.

Becoming well-versed in these rules is a good start. Additionally, financial advisors should keep meticulous records of all solicited reviews that were published or promoted on a financial advisor/RIA website or on social accounts. This provides a clear path for how the testimonial was obtained and where it was published, providing documentation for compliance officers and regulatory agencies. 

It also pays for financial advisors to stay current on the latest updates to this SEC ruling. It stands to reason there will be some clarifying opinions and regulations as the agencies gain more experience with the processes that are used by advisors.

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