Social Media Compliance: What Every Financial Advisor Should Know

18 Jun 2024

Image of person using phone to signify social media

Are financial advisors allowed to post on social media?

Many advisors who have not yet started social media for their financial advising businesses are waiting because they are not sure exactly what is allowed—whether by their own compliance teams, the SEC, or FINRA. If you fall into this category or if you have started and want to make sure you’re doing everything by the book, we’re here to help.

We recently held a webinar with N2 Content Marketing focused on financial advisor social media compliance. If the N2 name rings a bell, it may be because you’re one of their combined half a million views on social media or because you caught a previous webinar from Nick Meyer, CFP®, and Nate Hoskin, CFP®, on how to attract prospects with short-form video content.

Nate built his own financial advising firm by studying hard for his designations and posting short-form video content on social media. He spends nothing on paid advertising and attracts 7-10 inbound prospects a week from social media. He taught himself the rules and regulations and shared his wisdom with us, while noting he is not a substitute for compliance teams or formal regulators. His hope in providing this valuable content to us is, “If you work with an outsourced compliance team or if you work for a broker-dealer, you get to ask them the right questions.”

Below, Nate dives into advertising, written policies and procedures, records retention and archiving, the concepts of entanglement and adoption, testimonials, and the importance and proper execution of disclosures. Watch the full webinar on our YouTube channel.

Learn what constitutes advertising

The first thing Nate wanted to clarify was what constitutes “advertising” under the SEC New Marketing Rule. For anything falling into advertising, advisors need to follow more stringent rules. “The number one thing I want you to take away from this is: if you talk about your strategy, if you talk about your investment holdings, if you talk about your performance, those are all things that are highly, highly regulated, and that is something that I have always been told, ‘Just don’t.’” Speaking about your performance isn't just risky from a marketing perspective but can also potentially lead to negative client acquisition and retention experiences.

One big opportunity that doesn’t count as advertising is “general education material and market commentary”. The SEC and FINRA are actually encouraging professional advisors to teach the masses proper financial literacy, perhaps in an effort to offset the number of non-professionals talking about financial topics online who can get things wrong or mislead the public, whether on purpose or accidentally.

Two other categories that do fall into advertising are “pre-recorded videos that solicit” and “testimonials and endorsements”. Nate walks us through how to follow the rules on these particular opportunities throughout the rest of the webinar.

Construct effective policies and procedures

The first and probably most important rule to follow is plan, write, and execute your advertising and marketing strategy. Outline all aspects including online advertising, pre-recorded videos, and paid ads in your written policies and procedures. Regular review and auditing of social media content are crucial to ensure adherence to these rules. And then there is the importance of keeping an archive to comply with the SEC Recordkeeping Rule, which Nate goes into further below.

Here’s Nate explaining his own firm’s policies and procedures:

Retain and archive everything

No matter the nature of your social media activities, record retention and archiving is of paramount importance. Several affordable services like the one provided with the XYPN membership or Sharp Archive (which can even archive TikTok) can automatically store your social media content.

Nate dives in more here:

Avoid entanglement and adoption

Many unwittingly engage in risky behaviors on social media and public forums, roping themselves into entanglement and adoption. Entanglement usually occurs when you contribute to the preparation of a public communication, for instance, speaking events or articles. Adoption comes into play when you endorse a third-party post explicitly or implicitly, which can include simple acts such as liking, commenting, sharing, and reposting.

Keeping full control of content posting and archiving is quite beneficial in reducing the risk of entanglement and adoption. Nate explains that posting your own content is often significantly safer, provided it's done correctly:

Follow the SEC new marketing rule for testimonials

Following the latest SEC marketing rule changes, financial advisors can now use testimonials, demonstrating to prospects evidence of the service you provide. However, you need to navigate these waters carefully. The new guideline requires meeting specific disclosure, oversight, and disqualification provisions to be able to use testimonials and endorsements. If you are state-registered, it’s also a requirement that your state of domicile has adopted the SEC new marketing rule.

Nate reviews the SEC new marketing rule in this clip:

Disclose, disclose, disclose

No matter the platform you're advertising on, appropriate disclosures safeguard you from potential legal issues. Disclosure statements should be readily available and easily accessible, ideally within a dropdown or description linked from your social media page or website.

Even though the SEC's new marketing rule has allowed advisors to share testimonials, remember that you must disclose how those testimonials were solicited and who was selected to provide them. If any compensation was involved in securing testimonials, it needs to be duly disclosed. It’s best to ask all of your clients for testimonials, not just those who you think will give you the highest praise.

Lastly, any recognition or designation claims on your website or social media should be accompanied by a declaration that there is a bilateral non-endorsement—that the awarding organization is not endorsing you and vice versa.

This slightly longer clip explains how Nate discloses everything he needs to:

Navigating these rules can seem daunting, but with careful planning and foresight, financial advisors can use the power of social media to reach their audiences better without causing compliance concerns. For more information on short-form video and on how Nate and Nick can help you launch your own new marketing strategy, please visit N2 Content Marketing’s website today.