BBR Marketing

Social media do’s and don’ts for financial advisors

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Most professional services have some restrictions regarding how and what they can communicate outside of their firm. Registered financial advisors live by a strict set of rules  set forth by the Financial Industry Regulatory Authority (FINRA). With the growing interest in social media use in the financial industry and the ability to participate at any time and in any place, it’s important to understand the ground rules for your profession. As a result, FINRA has created guidelines for social media communications compliance, FINRA Regulatory Notice 10-06.

It’s sometimes easy to lose yourself and get caught up in an online discussion with your Twitter pals or Facebook buddies. For financial advisors, this can lead to trouble. As with hand-written and email communications, social media communications by a registered financial advisor must conform to rules that would also govern person communications and presentations.

So what are these rules, exactly? To start with, you should never present false or misleading claims or representations to investors. This is straightforward and pretty much a no-brainer; it’s something that shouldn’t be done in any form of communications. Where it gets a bit stricter is in the fact that it is the responsibility of firms to provide appropriate supervision to those approved to use social media, and sometimes, depending on the firm, advisors have to get all social media posts approved in advance.

Another policy involves record keeping. As with other forms of communications on behalf of a firm, social media exchanges must be archived and tracked, per Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110. This probably sounds daunting, but try not to fret. Everyday there is new technology being developed and released specifically for the purpose of tracking social media, such as Smarsh or Arkovi.

It’s generally considered a bad idea for a financial advisor to recommend a security through the use of social media, though what truly qualifies as a “recommendation” can be unclear. According to FINRA Regulatory Notice 10-06, it becomes the responsibility of firms to consult the Notice to Members 01-23 to further discern if an online exchange truly qualifies as a “recommendation” via Rule 2310 and proceed as needed.

Another regulation to take note of is whether or not the forum being used is considered static or interactive. Should something be posted in a forum that is considered static, the communication is construed as an advertisement and therefore must be pre-approved by a registered principal of the firm. Otherwise, with interactive forums, pre-approval of a specific message is not required and not considered an advertisement. FINRA Regulatory Notice 10-06 lists examples of static content like profiles, background or wall information as well as banner advertisements. Twitter and Facebook posts are considered interactive and do not require the pre-approval process per FINRA, but individual firms have different rules on this. Blogs are a little trickier. Most blog content is considered static. However, most blog engines encourage interaction on posts, so it basically boils down to figuring out if your particular engine allows for interaction.

Some firms also have restrictions in place regarding the use of LinkedIn. We’ve worked with two clients that were not able to receive or post recommendations from their clients, even though that can be one of the best ways to get referral business. I’m not sure if this is a firm-by-firm decision, but make sure you find out what is and is not allowed on LinkedIn before you start breaking rules unintentionally.

It can be tricky navigating the rules as a financial advisor using social media. You want to demonstrate your knowledge and showcase your firm, but you must do so without crossing certain lines. Most of the larger financial services firms have their own set of rules and interpretations of FINRA, so make sure you are familiar with these rules before you even create an account on a social media platform. For those that don’t have a firm policy in place, we highly recommend you create one to eliminate any confusion and to keep your firm out of trouble with FINRA. Take the time to learn and understand the nuances of using social media for a financial advisory firm. From there, craft a social media policy that very clearly states what can and cannot be shared in social media forums. If you have it written down in black and white, it will make it easier for everyone at your firm to know what is okay and what isn’t.

In an industry as regulated as financial services, you can’t afford to guess when you hit the SEND button. But even with this many rules and regulations to consider, social media can be a wonderful way to bring exposure for your firm, your services and create relationships that can turn into great referrals and clients down the road.