Marketing Execs Expect Wide Acceptance of New SEC Advertising Rule

Many say the new regulation permitting endorsements and testimonials in adviser advertisements brings it up to current consumer standards.

Marketing and retirement plan executives expect plan advisers will wholeheartedly embrace the new advertising rule from the Securities and Exchange Commission (SEC) that will allow financial planners, starting May 4, to include testimonials and endorsements in their advertising and marketing materials.

“I think it absolutely will inspire advisers to embrace this new rule and increase their advertising, and it may happen pretty quickly,” Kevin Darlington, general manager of Broadridge Advisor Solutions, tells PLANADVISER.

Chris Hooper, director of seminar services at M&O Marketing, agrees. “I work with retirement planning professionals, and I can tell you, they think this is going to be a big deal,” he says. “We also work with insurance-only professionals, and they have been able to use endorsements forever. It is an important way to reach prospects. It is a great way to build credibility and trust.”

Investment Adviser Association (IAA) President and Chief Executive Officer Karen Barr says the previous SEC advertising rule had a “very broad definition of testimonials and endorsements that, essentially, precluded any statement on a client’s experience, which is the normal way that people get business, so we welcome this change permitting advisers to use additional tools in their outreach.”

Broadridge conducts a fair amount of research on how different adviser segments market themselves, Darlington says. “We think grow-oriented advisers, especially, will wholeheartedly embrace the new SEC advertising rule because of how dramatic an opportunity it gives them to change how they market themselves,” he says. “If you are an adviser who, a year from now, does not include testimonials in your advertising, you will look naked compared to your competitors. We expect testimonials and endorsements will become a staple part of advisers’ advertising and marketing. The shopping experience for prospects looking for an adviser will be improved, as well.”

Darlington says Broadridge views the SEC’s decision to implement the new rule as stepping up to the plate with regards to how consumers shop for goods today, since many use tools such as Yelp to view other consumers’ take. “Choosing an adviser is an incredibly big decision,” he says. “Crowdsourcing has become a way that consumers shop today, and it only makes sense to extend this to the selection of an adviser, particularly a retirement plan adviser.”

Likewise, Larry Stadulis, co-chair of fiduciary governance at Stradley, says, “If you look at TV at any point in a day, you will see that the bulk of commercials are testimonials,” so the SEC has, essentially, brought its advertising rule, which had not been changed in more than 60 years, up to date, he says. “The most common question I have gotten from my retirement plan advisory clients with respect to their advertising is, ‘How can I include a testimonial in my ads without it appearing to be a testimonial?’”

Broadridge also expects advisers will feature endorsements—particularly video endorsements—prominently on their websites and that advisers will actively seek out endorsements from their clients, Darlington says. Advisers are also likely to distribute pamphlets including client testimonials at any meeting they hold, Hooper says.

Cathy Clauson, senior vice president of retirement solutions at AssetMark, expects the new rules will have the greatest impact on smaller retirement plan practices, those with $100 million or less in assets under advisement (AUA), as larger practices already have the infrastructure in place to readily prospect.

However, Ethan Corey, a partner with Practus LLP, says he thinks any adviser who pays a client to give a testimonial, be it in cash or in kind, such as with reduced fees or expanded services, could run afoul of the SEC and risk the chance of enforcement action and fines. “Any adviser who has a conflict of interest in running an endorsement or testimonial will have to expose that, and they might end up deciding that exposing those conflicts of interest dilutes the effectiveness of the ad to the point that they end up deciding not to run it,” he says.