What To Keep In Mind About The Marketing Rule For Investment Advisors

Are you a financial advisor aiming to grow your business without resorting to traditional, costly marketing strategies? If so, you're in good company. Many advisors rely on referrals from satisfied clients for what’s often called "organic growth." But in today’s digital world, relying solely on word-of-mouth isn’t enough. There's a massive opportunity to grow your firm by harnessing organic marketing, and the SEC’s new Marketing Rule could be your game-changer.

Organic marketing is all about building your brand and reputation without the need for paid advertisements. Instead, it leverages long-term strategies like blog posts, social media content, client testimonials, case studies, and guest posts. The most powerful tool in this arsenal? Client testimonials and endorsements. Research consistently shows just how influential these are: 92% of consumers read online reviews before making a purchase, and 95% say that reviews directly influence their purchasing decisions. Testimonials hold the highest effectiveness rating for content marketing at a whopping 89%. In today’s digital marketplace, testimonials and peer reviews carry the same weight as personal referrals once did. To stay competitive—and appeal to the next generation of clients—it’s essential to embrace digital strategies that make the most of these tools.

In December 2020, the SEC introduced an important update to its advertising and solicitation rules (the Investment Adviser Marketing Rule). This amendment opened up a whole new world of possibilities for SEC-registered firms by allowing the use of testimonials and endorsements in their marketing efforts. For advisors, this means you can now use the experiences of satisfied clients or third-party endorsements as a key part of your outreach.

So, what’s the difference between a testimonial and an endorsement? Testimonials are statements from your current clients about their experience working with you. Endorsements, on the other hand, come from individuals who aren’t necessarily clients but still support your services, this could include lawyers, business partners, or service providers. Even better? These testimonials and endorsements can come from a variety of sources, including social media posts, online reviews, and personal referrals. However, with great power comes great responsibility. The SEC’s new rule comes with important disclosure requirements to ensure transparency and trust.

When using testimonials or endorsements, advisors must meet certain conditions. They must clearly disclose whether the promoter is a client and whether they were compensated, provide a brief statement about any potential conflicts of interest, and detail the terms of any compensation agreement, if applicable. The critical thing to remember is that these disclosures must be clear and easy to understand. They should be as visible as the testimonial or endorsement itself, ensuring transparency and fairness to potential clients.

Now that you know how valuable testimonials and endorsements can be, how do you go about gathering them? There are several effective strategies: sending satisfaction surveys to your clients and asking for feedback, sharing a link to your Google My Business page and encouraging clients to leave reviews, requesting endorsements from clients or colleagues through LinkedIn, sending personalized emails asking for a written testimonial, recording video testimonials for your website or social media, and even offering small incentives, like a gift card, for clients who provide reviews. A well-structured referral program can also be a great way to encourage clients to endorse your services.

It’s important to keep in mind that transparency is key throughout this process. Publishing all testimonials, not just the positive ones, demonstrates that you’re open to feedback and committed to building trust and credibility with your clients.

While the SEC’s Marketing Rule presents a fantastic opportunity, it’s important to understand its application. The rule specifically applies to SEC-registered firms, and while state-registered firms may not fall under its purview, they should still operate within their state’s most restrictive regulations. Furthermore, your firm may choose to prohibit testimonials and endorsements altogether depending on its own internal compliance policies.

By combining smart marketing strategies with a deep commitment to compliance, you can grow your firm while staying within regulatory boundaries. Now is the time to embrace this shift and let your clients help tell your story. Are you ready to leverage the power of testimonials and endorsements to grow your business? Watch my full breakdown of the Marketing Rule to make sure you’re staying compliant, or check out more of articles on our website.