Social Media Compliance for Financial Advisors

Nate Hoskin: Rule number one: plan it, write it, and then actually execute it. What I mean by that is that every single advisor has their compliance manual, and they also have their operating procedures. These are the written rules that your firm has to follow. These are the things that you share with the SEC or with the state when you are going and getting new registrations. So this means that if you are doing online advertising of any sort, if you are making prerecorded videos, if you are running paid ads, these need to be in your written policies and procedures.

These are what I pulled straight out of my written policies and procedures. These are the different rules that I have within my firm for keeping up with social media, making sure that I am auditing it, and making sure that it's really compliant.

For the first one, the CCO is going to conduct reviews of social media usage. So what I do is I go back through every month and look at where everything was posted, and I do a quick double check to make sure that everything is where it's supposed to be. It's archived, I know when it was posted, and I know which compliance representative approved that content.

Then I make sure that all of my scripts are submitted for approval before they're posted or disseminated. This means that when I use my template — which is something that we'll share alongside everything we're going to give you after this webinar — I am saying, this is the compliance rep that approved it, this is when it was approved. So that if a regulator were to ever come knocking, I can show them a full record of that video and show them that I'm very carefully keeping it compliant.

And finally, I have that archiving. So not only do I have the approval, not only do I know the script is compliant, but I'm also able to show them the exact video and where it's posted.

All of this is super straightforward. As you guys know, we don't rise to the level of our goals, we fall to the level of our systems. So making sure that our systems are really airtight is going to be the first place to start, regardless of what we are doing as advisors.

Nate Hoskin: I've mentioned archiving a number of times because, whether you are adopting a post, whether you are participating or becoming entangled in that post, or you're posting it yourself, chances are you need to keep a record of it. You need to have some sort of record of, what was that video? What was that post? When did I post it, and who approved it?

So there are a couple of great services out there. XYPN provides a great archiving platform. That's currently what I'm using. But like most of the archiving platforms that you'll find, they don't archive TikTok. So I'm also using Sharp Archive, because that is a great compliant archiving system that includes TikTok.

By using those two services — both are extremely cost-effective. One is included in my XYPN membership. The other one is a total of like 38 bucks a month, when I only have TikTok on there. It's incredibly cost-effective to just make sure that I have everything, and I don't have to go in and upload everything. They just pull it right off the social media platforms and keep track of it in a way that I can't manipulate, which means that I can't go back in and massage posting times or what the video was, that kind of thing.

That's the most important thing for archiving: that it is behind a glass wall from the advisor.

Nate Hoskin: Let's talk about entanglement and adoption, because as I said at the beginning, many of you are already doing a couple of the riskiest things you can do on social media and in the public forum as financial advisors. Many of you are entangled in certain types of content. Entanglement happens when you are actually involved in the preparation of a communication, or if you have some control over that third party's distribution. And adoption happens when you explicitly or implicitly endorse that information or that post.

All of that sounds really esoteric. It's like, okay, this is just a lot of legalese, this is just the SEC writing things that are confusing to make it a little bit harder on us. So here's what I pulled from it.

You are entangling yourself if you are involved in news features, speaking events, articles, or maybe even book quotes, because you are playing a role in the development of that content. You are contributing your opinion and your expertise, and then you might have control over how that is disseminated. So that means that if that content — even if it's not the little piece that you contributed to or participated in — is found to be noncompliant, you are now tangled up in that infraction.

So that is a big firm risk. That is something we have to think about when we are asked on HARO, or quoted to provide a quote for an article. We have to make sure that what they're talking about is very compliant and something that we can put our names on safely.

The same thing goes when we are interacting on social media, because I am willing to bet that all of you are on social media in some way, and most of you are on social media in a business capacity. This means that when you're on LinkedIn and you are liking that post that your buddy posted, you might actually be adopting that content. And what I mean by adoption is, again, if they are found to be non-compliant, but you put your weight and your expertise behind it by commenting on it or reposting it or something of that sort, you can be found to be non-compliant.

So those things are very hard to control, and we already do these. That's actually the riskiest part of social media. When we can control from start to finish how the content is produced, how the content is approved, how it is posted, and how it is archived, we actually protect ourselves as advisors. So that's one of the arguments that I'm going to make today: posting your own content is actually significantly safer, if done correctly, than just interacting on social media and with the public forums that we already work with.

Nate Hoskin: I want to read this in full because it's a little bit confusing, and this is straight from the SEC's new marketing rule. "The marketing rule prohibits the use of testimonials and endorsements in an advertisement."

So as a baseline, we still aren't technically allowed to do testimonials or endorsements. But what the new marketing rule has added is, "unless the advisor satisfies certain disclosure, oversight, and disqualification provisions." So what does that mean? That means that as a baseline, we cannot do testimonials. We are guilty until proven innocent, and we have to do a couple of things to prove that we are actually acting responsibly and that we can post these testimonials.

The way they outlined it in the marketing rule is solicitation and selection, oversight and agreements, disqualification, and state rule adoption. Again, we're talking about very complicated legalese. We need some sort of lawyer to dig through and figure out what this means. So I actually did that. I have worked with a number of former regulators and compliance guys to ask them, what does this mean? Because I didn't understand it as a human.

The thing that I pulled from all of those meetings and all of that feedback from the experts is that you can use testimonials if you tell people how you got the testimonials, you oversee solicitors — so you oversee anyone who might be going out and using those testimonials, people who might be selling on behalf of your firm — and you or the solicitor are not bad actors. Meaning, if you have a felony, if you have a previous securities infraction, if you've got something going on, chances are you are a bad actor and you are going to be immediately disqualified from using testimonials.

If you haven't been entirely disqualified from owning an RIA or trading securities — and I'm assuming that most of you sitting in here are not bad actors, you don't have that record. And if you have a complaint on your BrokerCheck file or something like that, that does not immediately make you a bad actor. We are talking about severe infractions that would disqualify you from this sort of thing.

And then finally, if any of you are solopreneurs or state registered RIAs, it's really important to know that you also have to have your state adopt the new marketing rule. Because if you are registered with the SEC, you adhere to the SEC's rules — you're that one level up. But if you are state registered, each state handles this differently. So if your state has not adopted the new marketing rule — for example, last time I checked, Arizona has not adopted the new marketing rule — then you are not allowed to do testimonials, unless you are out of that state.

What I learned from the regulators is, it has to be your state of domicile. So for example, I am registered in Arizona because I have more than five clients in Arizona, but my state of domicile, my office, is in Colorado. So it is Colorado's job to hold me compliant, and it is my job to adhere to Colorado's rules, not necessarily Arizona's, even though I'm registered there. So make sure that the place where you are working out of is actually allowing the new marketing rule and allowing testimonials. That's the final component, to make sure that these testimonials are actually going to be valid for you.

Nate Hoskin: So this is pulled directly from the FINRA rules and from the SEC marketing rule to say, these are the disclosures that you should have. Now I'm going to show you how they've actually worked in execution for me. And fair warning, this is a bit of a messy slide. I just wanted to give you guys as much information as I possibly could in terms of how I actually do this.

On social media, you have the ability to have a links page. A links page is the landing page that people can arrive to from your social media. I highly recommend having a links page. If any of you want to go back and watch our previous RightCapital webinar, we do a full hour on getting started with social media. One of those is going to be your links page and how you actually drive attention and turn it into conversions.

Within that links page, which is what we are seeing up here in the top left, I have my disclosures above the fold. Above the fold means that if someone arrives on that page on mobile, or on the desktop, they don't have to scroll to see my disclosures. They can see it right away. I have chosen to put it in a dropdown, which as far as I've heard is totally allowed. I haven't heard anything about needing it to be immediately readable. People can click and view the disclosures.

This is my boilerplate disclosure. This is the one that says, this is for educational purposes only, not trying to sell you securities, that kind of thing. Then I have another two. This one is a little bit hard to read. We will be sharing these slides with you, so you guys can actually dig in and figure out what my testimonial disclosure is.

But what I try to do there is check off these three things. These are big words that essentially mean: how did I solicit these testimonials, which means how did I ask for them from my clients? And that works hand-in-hand with selection, because there is the question of how did I reach out and ask someone for a testimonial, and also, who did I select to give me a testimonial? Did I actually go out and ask every client to give me a testimonial? Or did I reach out to the people that I know really like me and just ask them for a testimonial?

In general, the recommendation that I've always heard is that you should provide an equal opportunity to every client to give you a testimonial. You shouldn't go out and cherry pick. You shouldn't say, oh, I know this person really likes me, this person has given me a lot of referrals, I'm going to have them give me a testimonial. Because chances are most people who are willing to take the time to leave the testimonial are going to like you. I've found that there is a huge bias towards positive when it comes to asking for those. So the way that I solicited those testimonials is I went out and selected my entire client base, and I sent them an email and said, will you write me up a testimonial?

Then the final piece is compensation. Did you pay for these testimonials in any way? Because you can't just get testimonials from your clients — you could get testimonials from anywhere. You could get testimonials from a random person on the street, pay them a hundred bucks and have them write you a testimonial. Probably not recommended, but if you did pay for them, you have to disclose that that is how you received them.

And then the final thing to tie together the testimonial endorsement disclosure is to actually say, this is not representative, or this may not be representative of your experience. That is the language that I've seen in every single template disclosure: people had a great time working with Nate, but this is not a guarantee or a promise that you are going to have a good time. So pretty straightforward.

And then the final one is recognition and designations. So the disclosures on my links page, and then the disclosure that I put in my captions on my videos where they are allowed. Some platforms only allow you to do like a hundred characters in your video description. Others allow up to 2,000 or 10,000. So when I have that larger block that I can use, I will write in my full disclosure, I will put that in my description, because why not? It's the exact same description that I have on my links page. It is that boilerplate, the one that we all understand.

The other one that I don't have shown here is your recognition. Because many of you are CFPs, many of you have been recognized maybe by the Investopedia 100, you've won a couple different awards, that sort of thing. So if you have, and you are posting those on your website, you need to make sure that you are disclosing that there is a bilateral non-endorsement, which means I am not endorsing that awarding agency, and they are not necessarily endorsing me. This is the most important with the CFP, at least in my experience: yes, the CFP is allowing you to use their marks and their branding, but they are not necessarily endorsing you. That is a very gray line that we need to make sure we pay attention to.

So again, this is another boilerplate template. This is something that your CCO or your compliance team should absolutely be able to pull together. I highly recommend having it anywhere you share your awards or your designations.