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The SEC’s New Marketing Rule: Who’s Using Testimonials and How

Valerie Rivera September 27, 2022

SEC-testimonial-rule
Updated on: November 3, 2023

When it comes to marketing, advisors have always relied on social proof, including asking clients for referrals. So, when the Securities and Exchange Commission unveiled its modernized marketing rule that lifts the ban on certain types of testimonials for SEC-registered firms in December 2020, many were hopeful.

Testimonials, ratings, and reviews hold promise for financial planners. As the profession has moved away from a focus on investment performance and toward holistic financial advice, sharing real-life client experiences carries more weight. The SEC marketing rule change will hopefully pave the way for financial planners at RIAs to communicate their value to prospective clients in impactful ways.

Imagine a future where a client vetting you to be their advisor sees 25 detailed reviews with star ratings attached. This type of social proof, which consumers already use to select everything from a law office to a plumbing company, might become the crucial lifeblood of marketing efforts. However, with the compliance date of November 4 creeping up, the research shows not many RIA firms have been able to capitalize on this opportunity yet.

Crunching the Marketing Data

It looks like a slow and steady marketing approach has won out for the moment. More than 64 percent of SEC-registered firms did not complete the ADV Section 5L, newly created to show RIA marketing activities.1 That’s according to fintech company Indyfin’s analysis of Form ADV data this spring. Among the roughly one-third of RIAs who didn’t leave this field blank, Indyfin found that a mere 2 percent were using testimonials in their marketing. Endorsements—a review of an advisor by someone other than a client, such as an accountant—also had little adoption, with 2 percent using them.

Taking a closer look at third-party ratings, the numbers get interesting. More than 9 percent of the firms who completed ADV Section 5L indicated that they use third-party ratings in their marketing materials. Third-party ratings run the gamut, from “top advisor” lists to ratings published on sites like Yelp and Google. Although the sample is small, these numbers show the relatively important role these types of rankings have in advisor marketing—and hints at future possibilities, including the potential rise of advisor-specific ratings platforms that mirror those in health professions.

Remembering the “Squeaky Clean” Saga

The data shows that even firms with updated compliance policies are taking a “wait and see” approach to testimonials and endorsements. These cautious firms might remember the saga of the Squeaky Clean Reputation marketing agency, whose efforts to solicit Yelp reviews for advisors earned five-figure fines and bad press for those practices in 2018.2

No one wants to be the first to run afoul of the SEC’s new testimonial rule. Nearly 78 percent of compliance professionals ranked marketing and advertising as the hottest compliance topic for 2022, up 20 percentage points from the year prior.3

Protecting Clients’ Privacy

The risks don’t end at fines from the SEC, however. The issue of maintaining clients’ privacy and confidentiality also comes into play.

For example, Google includes a reviewer’s full name with their review by default. Asking for every client to write you a Google review, in line with guidelines meant to prevent advisors “cherry-picking” only the clients who will give a favorable review, might result in a full client list made available online for all to see.

That’s one of many reasons why the first step of any new marketing strategy should be to check in with your compliance staff to make sure you’re not putting the practice at risk.

Boosting Your SEO Strategy

Other benefits of online client ratings include a boost to advisors’ search engine optimization efforts. The quantity and quality of a firm’s Google reviews, for example, can influence where that practice shows up in search results. Firms trying to get more potential clients to find them through a web search will likely try an SEO strategy that leverages user-generated content such as reviews–this can help with prospecting for financial advisors.

To do this, you can set up a Google Business Profile for your practice (or if you already have one, learn how to optimize it). Formerly known as a Google My Business snippet, this is a box that pops up in the righthand side of a search results page with a company’s reviews, website address, hours of operation, phone number, and much more.

The idea is that when someone in your area types in “financial planner near me,” your local page will pop up. They will then see from this profile whether you have reviews they can read to help validate your services. For strategies on how to gather more reviews, read my previous article on collecting testimonials.

Showcasing Your Testimonials

Once you have a handful of detailed reviews on Google, you can create a testimonials page on your own advisor website where you’ll showcase ones that best speak to your practice.

You’ll need to be careful to include the correct disclosures and will likely need language such as “to read all of the Google reviews, go here.” In the spirit of transparency, this will link out to your Google Business Profile where the reader can view every review.

All About the Client Experience

The strategies here can help you take advantage of the new SEC marketing rule as the November compliance deadline nears—taking care to follow your organization’s guidelines, of course. With any luck, these new lines of communication will provide more clarity for consumers and more business for financial planners providing a top-notch client experience.

For more eMoney research on the latest marketing strategies and tactics, read our eBook: The Financial Advisor’s Guide to Digital and Social Media Marketing.

Sources:

1. “2022 Form ADV Research Report.” Indyfin, https://hub.indyfin.com/research/2022-form-adv-research-behind-the-numbers.

2. Neal, Ryan. “SEC Censures, Fines Advisers for Yelp Endorsements.” InvestmentNews, 2018. July 11. https://www.investmentnews.com/sec-censures-fines-advisers-for-yelp-endorsements-74989.

3. “2022 Investment Management Compliance Testing Survey.” Investment Adviser Association, 2022. https://investmentadviser.org/wp-content/uploads/2022/06/2022_IMCT_Results.pdf.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

Image of Valerie Rivera
About the Author

Valerie Rivera, Senior Product Marketing Manager at eMoney Advisor, leads the go-to-market strategy for eMoney’s suite of business development solutions. Valerie began her career at eMoney in 2012 as an Account Executive and then a Live Trainer where she trained over 1,000 advisors on the eMoney platform – helping them drive success in their firms. In her spare time you can find Valerie outdoors--snowboarding, hiking, and mountain biking in her home in Colorado.

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