SPURspectives

FINRA recently released their guidelines for financial advisors regarding social media. It essentially opens up the use of social media by financial advisors. This may not seem like good news on the surface to everyone. But if you consider that your retirement is one of the most, if not the single most expensive thing you buy in your lifetime, then it is welcome news that social media can now be used to talk about it. Perhaps it will get us to pay more attention to how and why we invest. So, what will we be seeing now that your advisor can Tweet? Let’s look at some of the rules:

1.    Approval and Recordkeeping (Rule 2210)
The rule that kept most advisors away from social media was the fact that posts, pokes, and tweets were classified as sales literature and required pre-approval. That is no longer the case — pre-approval of social media posts is not required. However, this is going to be a big cultural change for larger firms. So, expect to see cautious participation or adoption of systems to enable filtering for specific terms to flag some posts for pre-approval.

2.    Supervision (Rule 3010)
Written procedures are required. They need to be appropriate to the business, size, structure, and customers for the review of incoming and outgoing materials, printed or electronic. While this is no surprise, advisors are going to need to be very familiar with the nuances of each social media platform that they elect to use in order to develop guidelines. The speed of change in social media may be an eye opener for some firms.

3.    Books and Records (Rule 3110)
Ads and sales literature need to be stored and available for 3 years following their last use. Since online dialogue is defined as sales literature or correspondence it all needs to be captured and stored in a manner so that it can be easily retrieved. This applies to all communications — from the office, home or mobile device. Again, not a free for all on Twitter, but there are solutions available, some of which are low or no cost.

4.    Recommendations / Testimonials (Rule 206(4))
Basically, no. Publishing or distributing recommendations or testimonials is out. If a client sends you a nice recommendation on LinkedIn, you need to decline. You’ll probably want to have a statement worked out in advance to explain why you are doing this since recommendations are a big part of doing business in social space. You may even consider installing a system to disable these functions.

5.    Third-Party Posts (Rule 2210 / Notice 10-06)
Posts by customers or other third parties aren’t considered the advisor’s communications. So, the prior principal approval requirements of this rule don’t apply to posts. However, if you’re involved in the process the post can become attributable to the firm. So, retweeting a client’s post may be an endorsement by the firm depending on the content. Giving a client’s blog post a thumbs-up from Stumbleupon could also be seen as an endorsement. So, some level of care in training will be necessary before a firm opens social media firm wide. Some firms may also opt to find one of the software applications that enables posts to be moderated prior to going out.

So the rules aren’t difficult or complicated. It simply requires the same level of knowledge, character, and professionalism that are required for all other forms of communication from a firm. It’s a different channel and has some rules that are unique to the channel. Training can alleviate most of the problems that can occur. Some additional software may help your CEO sleep better at night.

Photo by flickr user florian.b under a creative commons license

Tags: financial services, marketing, social media, social networking