SEC rule allows financial advisor testimonials. Big whoop.

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In December of 2020 the SEC ruled that financial advisors at some point in the future will be allowed to use testimonials and reviews of their services, as long as certain conditions are met. Some people are saying financial advisor testimonials are the best thing since sliced bread but I take a different, opposing view.

I say, big whoop. This can potentially be a good, not great, but good thing for advisors. But you have to it right, and most of you will not.

UPDATE: As of April 2021 this rule is effective. Read this blog and listen to my interview of expert legal professionals about the new SEC marketing rule 2021.

First of all I want to say this is not legal or compliance advice. I have no idea when this rule will be put into effect officially, I did not promulgate this rule, and I am not an employee of the SEC. I don’t know when this is actually going to be put into effect. Always check with your compliance officer before taking any sort of action related to testimonials, reviews, and any other marketing-related activities.

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Now that I got that out of the way, thanks for joining me.

For those of you who are new to my blog/podcast, my name is Sara. I am a CFA® charterholder and I used to be a financial advisor. I have a weekly newsletter in which I talk about financial advisor lead generation topics which is best described as “fun and irreverent.” So please subscribe!

Sara Grillo, CFA is a highly fun and slightly crazy marketing consultant based in NYC.
I am an irreverent and fun marketing consultant for financial advisors.

Why I’m underwhelmed: a summary

Here are the reasons I can’t help but feel a bit underwhelmed by the SEC rule permitting advisors, at some point in the future, to utilize testimonials and reviews as part of their marketing.

  • It’s going to turn into one big puffery contest instead of really benefiting the consumer. Everyone is going to look good and puffed up. For that reason, it won’t be that helpful to the consumer. It won’t be a meritocracy like some are saying.
  • It’s going to be like a financial advisor publicizing that they received an award. Nobody picks an advisor based upon an award they got, but it does help you look more credible.
  • Most of you aren’t getting enough website traffic for this to even matter. For most advisors, their clients are the majority of website traffic and they just go straight to the login page.
  • Many clients won’t want their real names published, and this will weaken the testimonial.
  • Many of you are going to fail to comply with the regulations surrounding this, and it’s going to become yet another compliance headache. Again, I’m not a compliance officer and I am giving no compliance advice in this piece. However there will likely be strict guidelines to follow, recordkeeping requirements, and disclaimers to include. This is just another stumbling block that many advisors with weak or in some cases zero compliance support will struggle with.

Financial advisor testimonials – a glorified puffery show

What is going to happen once financial advisors start posting testimonials is that it’s going to turn into one big puffery contest instead of really benefiting the consumer. For that reason, it won’t be that helpful to the consumer. It won’t be a meritocracy like some are saying.

There is potential to get reviews that make a big difference. But most of you are not going to go about this thoughtfully and it’s going to become mediocre. How you ask for the review does matter. Most of you are going to need coaching on how to ask for a review so that it says something other than the wishy washy crap most testimonials will sound like.

The parallel between financial advisor testimonials and awards

I see a big parallel between financial advisor testimonials and financial advisor awards. Financial advisors are able, in certain circumstances, to publicize that they received awards. Yet no matter how much compliance advice they get, I still see advisors not including the right disclaimers with the awards, talking about them the wrong way, making false claims about the awards.

It’s almost like it’s a dangerous gift. It’s like if someone gave you a Damascus steel chef’s knife for your birthday, like a meat cleaver. You’d be happy and about how it could help you cut steak better, however you’d also be a little worried about cutting your own hand with it.
And that’s what I see here.

-Sara Grillo, CFA

The other thing is that just like no consumer is going to select a financial advisor based upon an award they got, it’s going to take alot more than just a great testimonial to get someone to sign up for your services. It can make a great first impression but this is not the type of service that people buy on a first impression. Financial advisors need a marketing plan that allows them to consistently appear in front of prospects who have expressed interest.

Those who wish to set this up should check out this e-book about financial advisor marketing plans. It includes a financial advisor marketing template as well.

Financial advisors need a marketing plan that allows them to consistently appear in front of their prospects.

Remember that nothing beats a solid referral from a client

A testimonial is a form of social validation. It looks good on your website, just like having the CFP® designation does or graduating from a top school.  And people do trust reviews, even if they are from someone they don’t know. However remember that the most important thing you can do is get referrals from your existing clients.

Just as the average consumer probably isn’t going to invest in a stock just because they read an article about it, the population at large is going to need a lot more than just a testimonial published on the internet to put their trust in someone.

It is an undeniable fact that people trust reviews and it can make a difference in their buying decision. However you are not selling washing machines, you are a financial advisor. A testimonial for such a personal service like this is considerably less powerful if they do not know the person making the recommendation.

The most credible words someone could say about a financial advisor aren’t those published in a newspaper, it is an endorsement from a trusted colleague who is a client of that financial advisor.

Point blank, period.

Regular communication with clients is the best form of marketing for a financial advisor

What financial advisors can take away from this is the importance of communicating regularly with their clients, through social media, emails, text messages, newsletters, videos, and virtual events. There is no lower hanging fruit for an advisor than the prospects who are the first degree connections of their current clients.

The most effective form of marketing for a financial advisor is the easiest form of marketing and that is deepening the trust that your current clients have in you and higher visibility is a big part of building that. You’ll find when it gets to a deep enough level, they won’t keep you a secret. I always tell people to look at this as a bonus and don’t depend on getting referrals, but there are things you can do to increase visibility with your client base and raise the odds that somebody passes on their info to their friends.

I discuss these techniques in my membership which you can learn about here.

Financial advisors and reviews

There are going to be two major places where financial advisor testimonials are likely to be posted:

  • Your website and marketing materials
  • Third party sites such as Yelp and Google

Reviews posted to a financial advisor’s website, unfortunately, probably aren’t as big a deal as you would think. For more financial advisors, website traffic is low. Most of the traffic comes from your existing clients, and in most cases the clients just go right to the login screen instead of perusing your site.

Are reviewing that meaningful?

This is going to turn into a puffery contest. These reviews are going to be end up being the same wishy washy crap that a lot you already have on your website. I know this because I in fact do help my client surveying their practices for feedback and it generally comes out wishy washy and not saying that much, because the advisor has to be coached about how to ask. And even when they are coached about what to say, most of the time the feedback comes out very generic and cheesy.

Cheesy like cheese crackers.

Not all reviews are created equal. Do you think this testimonial would carry that much weight with a prospect?

Jane is trustworthy, responsive, and great to work with.

-Ben XYZ

Oh, how sweet!

It’s claptrap.

The point of a testimonial is to show your strengths as a financial advisor. Unfortunately most of them will come out like this one above. There is not that much differentiation between you and the next advisor. Financial advisors need to thoughtfully ask for a testimonial. This will help get reviews that actually say something different and are more powerful.

Before you take any marketing-related action, talk to your legal or compliance advisor. I am not telling you to take action now or at any point. I am not an employee of the SEC nor am I your compliance advisor.

Key points about the SEC rule about financial advisor testimonials

In this article, I’ve described what I see as the outcome of the SEC ruling allowing financial advisors to use testimonials and reviews at a later point in their marketing.

Here are my key points:

  • The most credible words someone could say about a financial advisor aren’t those published on a website. It is an endorsement from a trusted colleague who is a client of that financial advisor. As part of your marketing plan you should be communicating regularly with clients. I discuss how to do this in my e-book about marketing plans for financial advisors.
  • Most of you could build a very nice business on social media just from the first degree contacts of the clients whom you have served. I discuss how to do this in my e-book about LinkedIn messaging for financial advisors.

Thanks for reading, and I’ll see you in the next one!


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Grillo Investment Management, LLC does not guarantee any specific level of performance, the success of any strategy that Grillo Investment Management, LLC may use, or the success of any program. This content is not to be construed as legal or compliance advice. For legal or compliance advice, ask your attorney or legal advisor.

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

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