The Nov. 4 compliance date for the Securities and Exchange Commission's new Marketing Rule is creeping up fast, clearing the way for advisors to use testimonials in their advertising and marketing.
Marketing and compliance experts on Tuesday offered their advice on how to comply with the rule — and how to make the most of newly available marketing channels.
As the SEC warned on Monday, when it released a Risk Alert, advisors may no longer choose to comply with the previous advertising and cash solicitation rules starting Nov. 4.
For starters, an advisory firm "needs to ensure they've familiarized themselves with the changes contained in the rule and have enacted policies and procedures reasonably designed to detect and prevent violations of the marketing rule," according to Jason Vinsonhaler, RIA in a Box director of compliance.
"The SEC has released examination priorities for the rule, which include policies and procedures and books and records," he said, adding the regulator will also be "reviewing substantiation information for statements made in advertising."
He added that "performance advertising remains an area of focus as well."
Social Proof
"Advisors preparing for the upcoming compliance date for the SEC Marketing Rule should start by laying a foundation to leverage social proof — reviews and testimonials — in their marketing," according to Susan Theder, chief marketing and experience officer at advisor marketing firm FMG Suite.
"The first and most important item in that process should be to claim and set up their Google My Business" account, she told ThinkAdvisor on Tuesday. "This will give advisors a place to collect, reply to, and repurpose reviews. When advisors get a review, Google will send them an email alerting them, and it is important that they quickly enter a reply to each review."
That is because "engagement with reviews, like social media, is critical and will also drive improved" search engine optimization results, she pointed out.
Second, she said, "they should think about and outline all the marketing channels and assets in which they can leverage their positive reviews."
An advisor's website is one "obvious channel, but other marketing assets such as slide decks, case studies, and blogs also provide a medium to promote this social proof," she explained.
Third, advisors should also "think about ways in which they want to compliantly solicit/collect reviews," she noted. "One method which is worth considering is simply incorporating messaging and a link into their email signatures and appropriate customer communications."
Last, she said, video testimonials can be especially effective. "Advisors who wish to leverage video should identify clients who are willing to participate and ensure they mirror their ideal client persona," she said.
"And, of course, before doing any of this, advisors need to consult with their compliance departments to understand their firm's policies and procedures and ensure they adhere to the guidelines that have been established," she added.
Justin Boatman, chief product officer at Riskalyze, agreed about the importance of advisors consulting with their company's compliance departments.
"One of the broad themes of the Marketing Rule is the level of importance the SEC is placing on client engagement as a prerequisite to bringing investment material in front of clients," he told ThinkAdvisor.
He added: "Advisors should, of course, consult their own compliance resources about the rule, but those who involve client inputs in their proposal processes and document their approach can rest easy knowing they're doing right by their clients."
Some Advisors Are Behind
"Right now, [advisors] should be working on reviewing all marketing and advertising pieces that will be in use on Nov. 4 to bring them into compliance with the new rule," according to Amy Lynch, founder and president of FrontLine Compliance, who previously served as an SEC regulator.
"Written policies should be drafted already or almost completed and firms should make sure that the type of marketing materials utilized are covered in the policies," she said Tuesday. "For example, if a firm uses hypothetical performance the policy must contain a section on the use of hypothetical performance and how it will be allowed, monitored, etc."
Advisory firms also "need to make sure they have all the necessary support and backup for all performance data or other factual data shown in marketing or advertising," she said. Each firm's ADV Part 2A brochure "may need updating prior to November 4th if the firm uses promoters, so that should be reviewed as well," she added.
However, "many advisers are behind the eight ball on this rule," she warned. "That's because there is more to it than just updating the firm marketing policy. Several areas need to be addressed and changes may need to be made in actual marketing materials and solicitation practices. This can be a heavy lift and if firms have not yet started then they are already behind."
