How Advisors Can Use Client Testimonials Under New SEC Rule

"You can have a Google link that you send to your clients, have them post [it] on Google, [and do] the same thing with Yelp or Yahoo or any one of these platforms," she noted. "If you want to create a place on your website where they can leave reviews — the same thing. Create a link and have them go post it."

Disclosures Required

There are, however, "a couple of things you're going to have to consider," she cautioned advisors.

For one thing, disclosures "have to be everywhere," she said, explaining: "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.

And that information must be disclosed "not just wherever you are having these testimonials or these reviews posted, but also in your ADV — you've got to disclose it in Part 1 and Part 2A now," she told viewers.

Other Rules

Advisors should be aware of the new de minimis compensation amount of $1,000 in any 12-month period, she said. Because of it, advisors "can give out a bunch of Starbucks cards, a bunch of gift certificates [or] little gift or cash prizes, so long as you're keeping it under that de minimis" amount, she said.

The advertising must also be fair and balanced, she said. Advisors may want to copy the reviews they get — good and bad — and place them on a unique web page where it appears more balanced than the original site where the reviews posted, she told viewers.

Advisors also need to be cautious when including rankings in their testimonials and other ads, she warned. This has not changed much, she said, noting that advisors must be aware of the age of rankings they include because they can't use outdated ones that no longer apply. Advisors using rankings should also disclose details about them, including an explanation of what the rankings were based on, she said.

It is especially important to be careful when saying if you're on the Amazon best-seller list because it "can be a little bit misleading," she warned, saying she knows people who have been on the Amazon best-seller list but sold about six books total. It is imperative to include a disclosure if citing the Amazon list and be careful how long you use your place on the list because it keeps changing, she added.

Gross and net performance must also be shown side by side now if an advisor is including their performance in a testimonial or other ad, and must show one-, five- and 10-year performance or, if they don't have at least one of those, they must show since-inception performance if showing portfolio performance, she cautioned.

Advisors should also "be very careful about identifying" the clients giving testimonials, she said: They should get their clients' consent first and ask how they want to be identified. The speakers also cautioned that advisors should consult their firm's compliance staff or other legal experts when in doubt about a component of the new rule.

— Related on ThinkAdvisor:

• SEC's New Ad Rule: The Pros and Cons
• Tougher Advisor Regulation Coming in New Year
• SEC Adopts New Ad Rule, Allows Client Testimonials