Financial Advisors: Making Sense of the SEC’s Third-Party Review Site Rules

This post was authored by Marie Swift and originally appeared here on GuideVine.

Financial Advisors and the marketing consultants who specialize in working with them know that the SEC no-testimonials rule prohibits Registered Investment Advisers and Investment Adviser Representatives from using client endorsements in their advertising. But in April 2014, the SEC issued new guidelines on the use of social media and online communications, which opened the door to something new: the ability for Advisors share on their own websites and profile pages public comments about their services that are posted on independent websites (such as Yelp, Angie’s List, Wallet Hub, and GuideVine).

There are, of course, rules related to how the content from these third-party sites can be used on sites and profile pages the Advisory firm controls. Here’s how to think things through.

NO CHERRY PICKING

The Advisor must include both positive and negative reviews. This means there can be no cherry picking — the Advisor must publish all comments, unedited. Financial Advisors can’t just copy and paste the good ones and leave the bad ones behind on the third-party site.

The SEC guidance specifically says: “The investment Adviser may publish only the totality of the testimonials from an independent social-media site and may not highlight or give prominence to a subset of the testimonials.”

Advisors can also publish mathematical averages of the comments from third-party review sites.

The best way to benefit from the third-party review sites, according to many industry consultants, is to post the logo and a link to the page where the third-party reviews live.

In this writer’s opinion, it could be worth linking to the third-party review page and monitoring daily to ensure that one is comfortable with any new comments. If the comments on the third-party review site ever become a concern, Advisors have a couple choices — remove the logo and link to the third-party site or embrace the fact that studies show that companies that have a disproportionate number of marginal or negative reviews are seen as more credible and real.

CONSUMER TRUST BUILDING 

Stats from social commerce company Reevoo show that, while it may seem counterintuitive, the presence of a few bad reviews is actually a good thing.

“Reevoo found that people that seek out and read bad reviews convert better, as the very fact that they are paying such close attention means they are more likely to be in purchase mode,” says writer Vikki Chowney in an article on eConsultancy.com. “68% of consumers trust reviews more when they see both good and bad scores, while 30% suspect censorship or faked reviews when they don’t see any negative opinions on the page.”

The Edelman Trust Barometer shows that people now trust one another more than they do established institutions. People have always turned to their peers when making important decisions. Now, with social media’s impact on online search, it is easier than ever for those doing research online to find “a person like me” or “ a regular employee” — both of which are seen as more credible than a company executive or paid spokesperson.

For more insights on building trust online read this Marie Swift piece on Financial-Planning.com: Why Financial Advisors Can’t Ignore Social Media.

NO INFLUENCE ON THIRD-PARTY SITES

The SEC guidelines also state that Financial Advisors must not have the ability to influence comments from the general public on the third-party site. This means the Advisor must not try to influence how they’re portrayed on those third-party sites. The SEC is trying to ensure that potential clients get the full picture of an Advisory firm.

“Advisers would violate the SEC’s testimonial rule if they drafted or submitted comments to a third-party review site, paid others to submit favorable comments to the site or suppressed, edited or manipulated the order in which the commentary was presented,” said tenured industry writer Mark Schoeff, Jr. in this article published by Investment News, SEC Oks Use of Third Party Social Media Endorsements.

CONTENT NEUTRAL LINE-UP

Beyond just the “all or nothing” restriction covered in the “no cherry picking” section of this article, Registered Investment Advisers must keep in mind that they may only publish testimonials from an independent review website in a “content-neutral manner.” According to the SEC guidelines, this means chronological or alphabetical order. It is not okay to put the best rankings at the top and the worst rankings at the bottom.

This is one reason why this writer believes it is best to simply link to the third-party review site and then monitor the discussion threads on a daily basis.

BE CAREFUL WHAT YOU POST ON THIRD-PARTY SITES

What would you do if you saw this post on a third-party review site?

“Found Jake Advisor to be out of touch, unresponsive and arrogant.”

How about this one?

“I have known John Planner for many years. One of the nicest guys you will ever meet! He knows his business and will take GREAT care of you and your assets.”

 It is human nature to want to applaud the person posting the positive comment — but Financial Advisors should refrain from doing anything that might be construed as encouraging positive comments. So the best thing to do when a Financial Advisor sees a positive comment is to do nothing — at least not publically. It would be nice however to say, “thanks for your kind comments on xyz review site,” over a cup of coffee, while at the same time explaining why you can’t try to encourage positive endorsements online.

In the case of the negative comment above, it is human nature to want to defend oneself. As a marketing communications and reputation expert, this writer believes that it would be best if the Advisor in question posted something simple such as, “I’m sorry you feel that way. Please call me to discuss.”, if the third-party site allows responses. And leave it at that. Check with compliance first, of course, to make sure their interpretation of the SEC guidelines is in alignment with this reputational recommendation.

BOTTOM LINE

“This rule would appear to put Advisers in the clear regarding third-party review sites, such as Yelp, presuming that the Adviser really does not have any affiliation to the site, and cannot control the comments posted (e.g., by trying to delete negative comments while allowing positive ones to remain),” said Michael Kitces, director of research at Pinnacle Advisory Group, on his blog, Nerd’s Eye View.

Check with your company’s compliance department to learn more about internal policies and procedures and/or outside legal counsel to make sure all regulatory guidelines are being met at your firm. A recent report from McGladrey, LLC, a leading provider of assurance, tax and consulting services in the US, says that financial firms should be prepared for Heightened SEC Regulatory Focus. Smart Financial Advisors will be ready for questions and conducting themselves in close alignment to the SEC rules.