When it comes to social media, a lot of financial advisors are still playing catch up to the technology. Many advisors are excited about using social media, but they may not use it as often or as well as they could. Their hesitancy may be due to concerns by their financial institutions, broker-dealers, or the financial advisor him/herself regarding regulatory or reputational risk. In addition, the tools we now use to communicate with each other and clients provide a document trail that can be used by regulators to audit our interactions and/or can possibly be used against advisors in the public media.
Many rules that govern our industry were written for another time. Compliance officers are often left to make old rules fit the new world. One example of this relates to the Securities and Exchange Commission prohibiting testimonials of financial advisors (SEC Section 206(4) of the Investment Advisers Act of 1940). It may seem unreasonable that “liking” someone on Facebook acts as a testimonial that could be perceived to sway investors. However, having 3,000 “likes” by clients might appear to be a different story. The Financial Institution Regulatory Authority (“FINRA”) has released much guidance over the last couple of years regarding Communications with the Public (FINRA Rule 2210) and social media in general.
There are steps advisors can take to become comfortable with regulations. Here are a few tips that may help you follow the regulations and reduce reputational risk:
Personal vs. Professional. Think like any other public figure. Do you want the world knowing your personal business? If not, avoid co-mingling your personal and professional pages in the same way you have separate email accounts. Set the privacy on your personal pages so that only people you know (presumably personal contacts) can find you. Then your clients and business associates see only your professional/public page. That also means you can’t use your personal site for business. If you choose to co-mingle these worlds, be ready for your firm to have some say about your personal content.
Know your firm’s policies. Make sure your broker-dealer allows use of social media and review their guidance/policies. For financial advisors working in banks or credit unions, your financial institution may also have policies. Most firms will require you to use your business email address, obtain pre-approval of all content posted, and turn off chat functionality.
Disclosures. Use your firm’s required disclosure that references the broker-dealer and/or registered investment advisor. You may need to list the states where you are registered to do business (securities and/or insurance in some states). The FINRA and SIPC websites may need to be referenced and hyperlinked.
Endorsements. If you are an investment advisor representative the SEC Advertising rules do not allow testimonials. This includes recommendations and endorsing skills and expertise, as on LinkedIn, as well as liking, as on Facebook. Hide or remove the endorsements that others give you. Some sites, including LinkedIn, allow you to either display or not display the endorsements of your skills when you set up your profile, so it’s important to turn those off.
Content. Your presence on the web and in your communications adds to the professional image you portray. The information you post must be accurate. Be careful of art or photographic images or links to images that could be considered by the public and regulators as misleading or promissory, such as a pot of gold, piles of money or charts that go only up. Don’t post any confidential information about you, your firm, or your clients. Make sure your position/title is up to date.
Links. When linking to someone else’s content, make sure you provide language around the link that helps the reader discern that the information on the linked site isn’t your opinion or content.
Monitor your site. Some of the content on social media sites, such as posts, is considered by the regulators as “public appearances.” Treat your posts and responses to posts as if you were asked a question at a seminar. If answering investment related questions, stay general in nature. Don’t include specific advice or product-specific information that others could interpret the wrong way. Instead, entice the readers to call or email you for more information. Most sites have the ability for other people to add content to your page. You will need to monitor your site frequently to look for any posts that are inappropriate or customer complaints that require you or your firm’s attention.
As financial professionals, we are held to a high standard in our communications with the public. Don’t let the medium of websites, social media, and technology lull you into a casual attitude. Remember to be professional in your communications, because, hopefully, someone is reading. Your professionalism will speak for itself!
By Monica Daggs,
SVP, Trading and Implementations, CFS and SPF