Experienced advisors know that a strong marketing game plan is essential when it comes to drumming up even modest interest among prospects, let alone getting them to engage in multiple communications and sign on the dotted line.
Knowledge is power, but advisor marketing can be minefield. There’s a bit more latitude for independent advisors, but firms attached to broker-dealers or wirehouses usually must either use in-house marketing materials and tactics or get their ideas approved by a compliance time. That’s time-consuming and an irritant, particularly when the firm is attempting to develop marketing strategies relevant to specific niches or regions.
All of that doesn’t include the various federal guidelines advisors need to adhere to when developing promotional materials. If there’s one positive about federal regulations it’s that the rules are straight-forward and uniform because federal preemption supersedes state laws.
Still, there are some states that have marketing regulations that are real pains-in-the-you-know-what for advisors and those rules aren’t always addressed at the federal level. For example, some states, including some with large populations, forbid advisors from publishing client testimonials as avenues for drumming up new business. Good news: a thaw may be coming on that front.
Time for Testimonials in Some States
Using customer testimonials is an old school marketing tactic and it’s been deployed across numerous industries, including wealth management. In this case, age and utility are positives because they speak to effectiveness. For advisors, testimonials are particularly pertinent because they convey trust – the most valuable currency an advisor possesses.
With all of that in mind, it’s worth noting the North American Securities Administrators Association (NASAA) issued a press release on July 29 indicating it “seeking public comment on proposed amendments to four rules related to investment adviser advertising. ” Those include the use of client testimonials in states where that’s currently forbidden.
“The most notable changes made by the SEC Marketing Rule included the allowance of previously prohibited advertising activities by SEC-registered advisers if they complied with conditions imposed by the rule,” according to amendments filed with the SEC by NASAA. “Testimonials, endorsements, third-party ratings, and performance advertising are specifically permitted provided the investment adviser complies with various conditions imposed by the specific subrules. ”
Under current NASAA guidelines, advisors can’t use endorsements, testimonials and third-party ratings in their marketing materials. That’s arcane and overly restrictive when considering some industries’ most essential marketing ploys revolve around testimonials and external rankings.
NASAA is displaying willingness to be more accommodative and allow advisors to embrace some basic marketing concepts that could be effective in terms of getting more prospects in the door.
“Under the SEC Marketing Rule, some advertising activities specifically prohibited for state-registered investment advisers would be permitted,” according to the SEC filing. “The ability of federal-covered advisers to advertise in ways that state-registered advisers may not could put state-registered advisers at a competitive disadvantage. ”
Why It Matters
Obviously, the more marketing tools, including even the basic ones, advisors have at their disposal, the better. That’s amplified when considering social media can be an ideal avenue for testimonials and highlighting favorable rankings.
The possibility of NASAA loosening some of its marketing rules is pertinent for another reason. As noted above, some of the states that don’t allow advisors to use endorsements and testimonials are big. They include California and Illinois, the largest and sixth-largest states, respectively.
Arizona, fast-growing state, and Ohio, home to its own fairly large population, are also on that list, indicating advisors in plenty of well-populated jurisdictions could benefit from a marketing regulation refresh.
