How to Safely Approach Online Reputation and Review Platforms as a Financial Advisor

Online business reputation and customer reviews have become a significant part of social media and various online platforms while rating everything from restaurants to products and even financial services. According to a recent article in Morningstar: “business owners are faced with the challenge of how to effectively manage their business’s reputation online”. More importantly, the article juxtaposes the growing customer review trends in relation to the regulations set forth for financial advisors. Let’s take a look at a few key points that advisors need to be aware of in order to avoid fines and lawsuits.

The Rule as a foundation

The Rule 206(4)-1 of the Investment Advisers Act of 1940 does not permit testimonials, yet does not clarify the word itself and in turn giving a certain amount of leeway in the matter of reviews. One must realize that the law was created in a different time and given the rapid changes and progress in the world of technology and business certain changes seem inevitable. This may be the reinforced by the actions of the SEC in 2014.

SEC and Financial Advisor Reviews

The article mentions the new guidance from the SEC on the Social Media And Testimonial Rule which dates back to 2014, and was supposed to clarify social media reviews in relations to the testimonial rule. However, it seems that it may have left it on the same vague status as before by making it more of a case by case basis without setting a real boundary. One important fact comes down to who has control over the account where the testimonial/review is published. This vague clarification lead to an understanding by some advisors that such reviews were acceptable only to be shut down with various lawsuits setting clear cut precedents for the foreseeable future.

Here are a few recent examples which should serve as an obvious warning sign to all advisors:

SEC Charges Investment Advisers and Representatives for Violating the Testimonial Rule Using Social Media and the Internet

Be Careful what you Post – SEC Continues To Focus on the Use of Social Media by Investment Advisers

Henceforth, one can conclude that the SEC generally considers social media reviews to be testimonials within the meaning of the rule. Yet, public commentary from independent social media sites doesn’t raise any of the dangers the testimonial rule was designed to prevent, provided specific requirements are met. Therefore third party sites where advisors have no influence of control may be the safe zone.

How to safely approach reviews as an advisor

Here are a few key points to keep in mind and try to follow:

1. Clients can independently leave reviews for advisory firms or their representatives but without solicitation or advisor’s access (affiliation or control) to edit review.

2. Endorsement/review features should be disabled on personal or business social media accounts as an advisor will have access to edit such content.

3. Carefully monitor comments on social media.

4. Stay away from online platforms where you cannot disable reviews.

5. Claim you listing and ensure all personal information is correct.

6. Avoid publishing or sharing independent reviews to other platforms.

While these are just guidelines, it is better to be more careful than aggressive to avoid lawsuits and fines. With the continuing growth of social media and review platforms, it will be difficult to monitor every comment or feedback to ensure it stays within the legal framework, therefore every advisor should take extra precaution (disabling reviews, monitoring comments, etc.) to safeguard oneself from unwanted problems and instead focus on a steady growth of a solid client base.

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