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.

Tagged as: Compliance, Guest, Mentions, Sharing, Social Media, Strategy