digital marketing for financial professionals

What the SEC Really Says About Digital Marketing for Financial Professionals

Any time that someone in the financial industry approaches me about marketing online, one of the first questions they ask is: “How can a financial professional market their services online legally?”. Which is a great question! It is very unfortunate that many Financial Advisors and Wealth Managers stop the conversation right at that point when talking amongst themselves because digital marketing is an incredibly powerful tool for building a financial professional’s client list that very few are actually working on.

This fear is completely understandable, with the likes of the SEC, FINRA, and your own in-house compliance officers peering over your shoulder, sometimes it can just be easier to say ‘screw it!’ and settle with cold calling, asking for referrals, and door knocking. But what does the SEC really say about online marketing for financial professionals? Surprisingly, a lot. There has been a lot of talk over the years about what a financial professional can and can’t do online, but most of it ends up at a place of inaction and confusion. Between all the rules and clarifications, it’s easy to get lost in the weeds and never end up trying something new.

As it turns out though, digital marketing for financial professionals is a wide open sea of opportunity for the ambitious advisor or wealth manager who actually wants to grow their practice and is willing to try something new. There are advisors out there signing 2-5 new clients each and every month through digital marketing efforts alone, not to mention the referrals that come from those happy clients later on!

So what does the SEC and FINRA really have to say about online marketing?

Well let’s start here with the SEC’s rules on advertising:

§ 275.206(4)-1 Advertisements by investment advisers.
This is the specific passage in the SEC rules that addresses advertisements by Financial Advisers. In general, the spirit of this rule is that an advisor should not misrepresent him or herself, mislead a client, publish an untrue statement, publish testimonials that refer to the services of an advisor, and defines what constitutes an advertisement. Below are the specific rules in their entirety (emphasis ours).

§ 275.206(4)-1(a) It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act ( 15 U.S.C. 80b-6(4)) for any investment adviser registered or required to be registered under section 203 of the Act ( 15 U.S.C. 80b-3), directly or indirectly, to publish, circulate, or distribute any advertisement:

§ 275.206(4)-1(a)(1) Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by such investment adviser; or

§ 275.206(4)-1(a)(2) Which refers, directly or indirectly, to past specific recommendations of such investment adviser which were or would have been profitable to any person: Provided, however, That this shall not prohibit an advertisement which sets out or offers to furnish a list of all recommendations made by such investment adviser within the immediately preceding period of not less than one year if such advertisement, and such list if it is furnished separately: (i) State the name of each such security recommended, the date and nature of each such recommendation (e.g., whether to buy, sell or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the market price of each such security as of the most recent practicable date, and (ii) contain the following cautionary legend on the first page thereof in print or type as large as the largest print or type used in the body or text thereof: “it should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list”; or

§ 275.206(4)-1(a)(3) Which represents, directly or indirectly, that any graph, chart, formula or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents directly or indirectly, that any graph, chart, formula or other device being offered will assist any person in making his own decisions as to which securities to buy, sell, or when to buy or sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to its use; or

§ 275.206(4)-1(a)(4) Which contains any statement to the effect that any report, analysis, or other service will be furnished free or without charge, unless such report, analysis or other service actually is or will be furnished entirely free and without any condition or obligation, directly or indirectly; or

§ 275.206(4)-1(a)(5) Which contains any untrue statement of a material fact, or which is otherwise false or misleading.

§ 275.206(4)-1(a)(5)(b) For the purposes of this section the term advertisement shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities.

So what does all that mean? Well in a nutshell, it means don’t misrepresent yourself or your products. Governments like to take simple concepts and create novels out of them and this is no exception. Many advisors will take a look at that and think that it means they can’t advertise online- but it’s just the opposite! They are actually quite clear in giving you some guidance about how you can advertise!

Going a bit deeper, FINRA has a list of exceptions that also apply to online marketing and open the door wide open for anyone who wants to seize this incredible opportunity.

The phrase “investment strategy involving a security or securities” used in FINRA Rule 2111 is to be interpreted broadly and would include, among other things, an explicit recommendation to hold a security or securities. However, the following communications are excluded from the coverage of Rule 2111 as long as they do not include (standing alone or in combination with other communications) a recommendation of a particular security or securities:

(a) General financial and investment information, including:

(i) basic investment concepts, such as risk and return, diversification, dollar cost averaging, compounded return, and tax deferred investment,

(ii) historic differences in the return of asset classes (e.g., equities, bonds, or cash) based on standard market indices,

(iii) effects of inflation,

(iv) estimates of future retirement income needs, and

(v) assessment of a customer’s investment profile;

(b) Descriptive information about an employer-sponsored retirement or benefit plan, participation in the plan, the benefits of plan participation, and the investment options available under the plan;

(c) Asset allocation models that are

(i) based on generally accepted investment theory,

(ii) accompanied by disclosures of all material facts and assumptions that may affect a reasonable investor’s assessment of the asset allocation model or any report generated by such model, and

(iii) in compliance with Rule 2214 (Requirements for the Use of Investment Analysis Tools) if the asset allocation model is an “investment analysis tool” covered by Rule 2214; and

(d) Interactive investment materials that incorporate the above.

This is pretty much laying out everything that you need to know about the possibility of advertising online. There are several opportunities and strategies laid out pretty explicitly here that you can employ in your business today, while other advisors are left wondering if they should try online marketing at all.

Focusing on education is the key. Provide value and knowledge to potential clients, and you will never be left wanting for client leads.

Now, of course I do want to throw in the caveat here- I am not a lawyer. I am a marketer who specializes in helping financial professionals market their business. Every business is different, and every business has different levels of comfort with their compliance operations. Always make sure to have your own compliance officer check out your marketing materials before you do anything a stranger on the internet told you 😉

Now all that being said, what are you going to do from here? The SEC and FINRA lay out some excellent guidelines for how you can legally market yourself online to create a powerful funnel of leads coming in. The best part of online marketing is that much of it can be automated to require very little time from you on a daily basis. How could your business be different if you had more time to work on it, instead of in it?

To learn some basic strategies that you can employ today, as well as some additional insights into what the SEC and FINRA say you can and cannot do in your marketing, check out this free PDF guide that we produced which will walk you through some of the basics of setting up 100% compliant digital profiles, creating an automated record-keeping system for audit purposes, and some of the incredible credibility-boosting tactics that are available to advisors that most don’t even know about.

If you are ready to supercharge your business and build a lead-generating machine, download your free PDF by clicking the button below:

digital marketing compliance for financial professionals

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