Online marketing experts routinely advise their clients to take advantage of social media as a means of engaging with current customers and reaching out to new ones. Social media is an incredible tool for doing just that. However, financial advisors and broker-dealer firms do not have access to the same benefits due to government restrictions relating to how social media can be used.
Social media can still be a valuable tool for financial advisors, but it has to be used in the right way. There are specific rules governing how social media and financial services interact, some of them being spelled out in Financial Industry Regulatory Authority (FINRA) Notice 10-6. We will discuss that notice in this blog post; our next post will discuss Notice 11-39. Be advised that both notices address a myriad of FINRA and SEC rules.
The scope of the first regulatory notice is very broad. In other words, the FINRA used the notice to lay out the basic principles of how financial advisors could use social media for business purposes. The second notice (11-39) goes into more detail.
Notice 10-06 addresses five key areas:
It should be evident that the rules surrounding how financial advisors and broker-dealers can use social media are somewhat complicated. Due to the highly-regulated nature of financial services, financial advisers have to be very careful about how they use social media to interact with clients.
If there is ever any question about the suitability or appropriateness of social media communications, it is better to err on the side of caution. It is far better to find other ways to communicate with clients and avoid running afoul of the law than to find yourself dealing with a FINRA or SEC investigation.
In closing, independent advisers should be aware that online marketing is a key component of successful business. Marketers with little or no experience are not likely to understand how Notice 10-06 affects social media for financial services. They may need to be educated so nothing is done that could compromise your reputation or legal standing. Furthermore, you may have to be the one to provide that education. That is the unfortunate reality.