How to Avoid 5 Mistakes With Client Testimonials

Expert Opinion May 14, 2024 at 02:02 PM
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What You Need To Know

  • Comments from clients make it easier for prospects to discover and trust a firm.
  • They also represent a cost-efficient opportunity to stand out from the competition.
  • Feedback requires coordination between advisors, marketers and compliance officers.
Group Hands Holding Speech Bubbles to symbolize social media posts and testimonials

Over the past year, I've spoken to dozens of firms and hundreds of chief marketing officers, chief compliance officers and financial advisors about their practices related to client testimonials. I've also interviewed current and former regulators, compliance attorneys and marketing leaders to understand which elements have resulted in the most scrutiny during examinations by the Securities and Exchange Commission.

Testimonials make it easier for prospects to discover and trust a firm. Given the relatively limited adoption across the wealth management industry, they also represent a cost-efficient opportunity to stand out from the competition.

Here are the five most common mistakes that firms make when it comes to testimonials.

1. Not building a process first.

The SEC Marketing Rule may have opened the door for advisers to incorporate testimonials, but it isn't a free-for-all. Effective and compliant testimonials require coordination between advisors, marketers and compliance officers. 

Before you start sharing client testimonials, make sure you:

  • Update your Form ADV Part 1 to reflect that your firm is using testimonials.
  • Map out the roles and responsibilities when it comes to testimonials. Be sure you can answer the following questions:
    1. Who will request the client feedback, what will the timing of the request be and how will you ensure that the process isn't biased? 
    2.  How will you obtain and store clients' permission to use their testimonials in marketing? 
    3.  Once testimonials have been received, how will you determine which ones to display and which ones might be inappropriate? 
    4.  How will that content ultimately be approved? 
    5. And finally, how will you document the entire process to demonstrate compliance in the event of an examination?
  • Update your policies and procedures to codify the elements above and ensure that your team has been trained on them.

2. Not making feedback part of the regular client experience.

Given the high cost of client acquisition and the even higher potential lifetime value, it's always surprising to see how few firms have implemented tools to systematically measure client sentiment. 

Even if you don't plan to incorporate testimonials in marketing, a culture of feedback helps firms identify referral opportunities and spot potential churn before it's too late.

If you are already engaging with clients about their authentic experience with your firm, it will be a much more natural conversation when you ask them for a testimonial.

3. Not using them effectively.

I had a conversation with an advisor late last year who asserted that, despite having a measurable effect on website traffic and revenue in every other industry, "testimonials don't work in wealth management." When I asked why he felt this way, he said it's because he placed testimonials on his website six months ago (he had two sitting at the very bottom of his site) and had yet to see an increase in new clients.

For testimonials to "work," clients have to see them and they have to believe them. That's why your Google Business Profile is the most impactful home for client testimonials: 9 in 10 searches start on Google and 63% of consumers check Google reviews before visiting a business. 

More than 150,000 people search "financial advisor" on Google every month, but they can't work with you if they can't find you. Generating compliant Google reviews is the quickest way to ensure that your business ranks near the top in local search and is much cheaper than trying to win on highly competitive search engine marketing keywords.

If your compliance team isn't yet comfortable with Google reviews, you can still make effective use of them on your website. It's fine to have one or two of them placed in strategic locations, but for both marketing and compliance reasons, it's best to also have a dedicated section that displays all the (appropriate) testimonials you have received. Providing a mix of feedback from clients makes the content more believable to prospects, more attractive to search engines and helps demonstrate to regulators that you aren't cherry-picking.

4. Not including the appropriate disclosures in advertisements.

If you are using testimonials in advertisements, such as in an email campaign or on your website, you must also include three clear and prominent disclosures: if the provider of the testimonial is a current client, if they have been compensated and if there are any material conflicts of interest. 

Keep in mind that "clear and prominent" means within the four corners of the advertisement. Placing a footnote at the bottom of your website likely won't pass that test.

5. Not taking advantage of the benefits of the new Marketing Rule.

Despite the SEC Marketing Rule recently turning two, fewer than 10% of firms are using testimonials, with most citing confusion about the rule as the primary reason. In a recent conversation, a former SEC examiner expressed surprise that RIAs were not adopting newly approved marketing techniques more rapidly. In his words, "they were designed to be used." 

They are beneficial for firms and prospects alike, he explained.

Andrew Johnson is co-founder and CEO of Testimonial iQ, which helps advisors leverage new marketing tools to grow their online presence by collecting and sharing compliant testimonials.

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