Social Networking for RIA’s

We welcome Joe Polidoro and Triplestop LLC in this guest blog post on social media in the regulatory world of investment advisory. Joe and his team are financial services veterans with a clear vision for the intersection of compliance, marketing and operations.

More and more RIA’s are successfully marketing themselves on LinkedIn, Twitter, Facebook, and other social networking platforms.

But there’s still a lot of confusion about what SEC regulations allow on social media. A lot of that confusion clearly comes from the rich but complex features of each platform, and how the regs apply to each feature.

To our knowledge, no one has attempted a feature-by-feature analysis of what’s allowed, on one piece of paper. So here’s ours. (We welcome your comments and suggestions.)

Triplestop LLC SEC Social Media Chart

THE SKINNY

The good news is that unlike asset managers, whose marketing must comply with FINRA regulations, SEC-registered investment advisors must abide by the rather more forgiving Section 206 (particularly 206(4)-1) of the Advisers Act. (We’d argue that smaller, state-regulated advisors should do the same.)

RIA’s therefore have a good deal of flexibility in marketing on social media. They need only follow four basic principles, in our view: Treat all social networking as advertising, monitor frequently, keep comprehensive records, and stay away from testimonials.

THE DETAILS

1. Think “advertising.” Although a few social networking features can be considered correspondence (direct tweets, for example), most are directed to more than one person and therefore qualify as advertising. So keep things simple: Treat everything you do on social networks as advertising:

  • Disclose all material facts
  • Don’t publish testimonials
  • Don’t use “RIA” improperly

2. No testimonials. We just said that, but here’s exactly how it plays out on the major platforms:

  • LinkedIn – Don’t provide or accept recommendations
  • Twitter – Don’t FAV (“favorite”) anyone else’s tweets
  • (it’s OK for someone favorite your tweets, as long as there’s no influence or entanglement, since it doesn’t appear on your page)
  • Facebook – Don’t use the “like” (thumbs up) button on others’ pages
  • Discourage friends from using the “like” button on your page – (regularly monitor your pages and delete “likes” as soon as possible*)

*We’ll provide instructions on how to do this in a follow-up post.

3. Monitor frequently. If you’re doing social networking well, you’ll be engaging in conversations with others. While you might be complying with SEC regulations, others contributing to your pages may not be. You’re responsible for what appears on your pages. So regularly monitor your pages and remove:

  • Anything that could be considered a testimonial
  • Any other content that conflicts with Section 206(4)-1 or 206 in general

4. Keep records. RIA’s must keep records of

  1. any communication sent to or received from clients or prospects that discusses your recommendations or suggestions,
  2. and all advertising.

Almost everything you could do on the platforms meets these criteria. Again, keep it simple. Keep records of everything. And observe other recordkeeping requirements:

  • Keep content for the five-year-plus period
  • Make sure records are accessible and secure (electronic archives are OK)

5. Develop a policy. Create and publish your social media policy. Make sure it clearly explains how it prevents violations of the Advisors Act (particularly testimonials). Review and update your policy annually. Social media platforms continue to evolve, and so will your use of them.

GETTING STARTED

The big three social networking platforms aren’t the only ones you’ll want to participate on. It can make lots of sense to participate on smaller, more targeted social networking platforms—bulletin boards, chat rooms, etc. Apply the above principles to whatever you do on these platforms.

Before you embark on any social networking program, make sure you have a recordkeeping system in place. We highly recommend Arkovi, which has been developed by veterans of the financial advisory industry and is being used successfully by a number of industry firms.

Once you’re plugged in, but before you start tweeting or updating, listen to the conversation. Visit http://www.advisortweets.com/. Subscribe to people like @advisortweets and @BillWinterberg on Twitter. On LinkedIn, search groups for “financial advisor” and join the groups that are most relevant to your practice. Then listen. Do this daily for 15 minutes, and in a month’s time you’ll be surprised at how well-educated you are on what is and isn’t effective for RIA’s on social media.

15 thoughts on “Social Networking for RIA’s

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  8. Blane and Joe, thanks for the clear communications guidance you provided here. We’ve added a link to it from the Why Tweet? page on our site.

    The quality of the information we saw being exchanged by RIAs using Twitter and the convivial networking we saw going on drove us in large part to develop AdvisorTweets.com. We appreciate your shout-out–we’re always happy to add more RIAs to the site!

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  11. I’m curious about the Facebook like button, both when others use it, and when I do personally. If we have it on our blog, and non-clients click it, does that count as a testimonial? I am not an attorney, but my reading of the SEC’s interpretation is that it is by clients.

    Also, when I click it personally, does that pertain to financial topics only? In other words, if I like or recommend a story on CNN about something unrelated to our business, is that okay? What if it were a CNN money article? Thanks!

  12. Thanks, Russell. Let me take your questions in order.

    The Facebook Like Button—a new plug-in from the social network giant—is installable on a site and, on platforms such as WordPress that accept the plug-in, on posted content such as blogs. Viewers who click “like” show up on the site or blogpost as “liking” your content. Their “likes” also show up under “recent activity” on their Facebook walls, with a link back to your content.

    (Anyone interested in learning more can read here: http://socialfresh.com/why-facebooks-like-button-is-a-gateway-drug/)

    Letting viewers share your content is OK, and it’s also OK if they speak positively about your content off your site, in our view of the regs. But the Like Button lets people provide a testimonial, albeit a very short one, on your site.

    So we’d say don’t do it—and then we’d say check with your attorney or compliance people, because we are neither.

    BTW, it doesn’t matter who’s giving the testimonial. Rule 206(4)-1 of Advisers Act says “any testimonial of any kind.” No distinction between clients, prospects, or total strangers.

    Now, about your testimonials, including clicking the Like Button. These simple social features that let you vouch positively for something—“favoriting” a Tweet, “liking” a Facebook wall post, etc.—look like testimonials to us. Their biggest risk to you is that they’re seen as recommendations.

    They’re different from social features that allow you to share content and give context—for example, Facebook’s Share Button. In one case, the world sees a simple “yes” vote. In the other, it sees your citation plus any commentary you provide that qualifies your opinion.

    OK, you might say—but some vouching is pretty harmless, such as “liking” a friend’s photo of his family vacation on Facebook. But what if that colleague works for a publicly-traded company? We wouldn’t put it past some lawyer to use your social activity to build a “fact pattern” against you or your firm.

    So we’d say avoid the simple “like” features and use the “share” features wisely (and check with a legal pro before you do anything).

    Last, we’re doubtful that the courts are going to distinguish between your personal and business use of social networking. The two realms tend to blur online anyway, and the more you’re online for business and personal reasons. the more they blur.

    None of this should be a buzz kill. Advisors who play by the rules have more opportunity than ever before to interact, build relationships, and build reputations online.

    Hope that’s a start for you, Russell. Please let me know.

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