How crazy are the regulations for financial advisers?
The Securities and Exchange Commission says a “like” of a posting on Facebook or LinkedIn may indicate an adviser is breaking the prohibition on including endorsements in his or her marketing (see related story, page 1).
“The question is whether a like on Facebook or LinkedIn is a testimonial,” said Krista S. Zipfel, founder of Newport Beach-based Advisor Solutions Group Inc., which provides advice on compliance to advisers.
“When there is not a black and white rule, there is a difference of opinion. Some [advisers] are more aggressive than others. We tend to be conservative and recommend that advisers turn off endorsements on LinkedIn,” Zipfel said of the business and employment networking site, which lets users include endorsements from past and present colleagues on their profile pages.
Financial advisers are struggling with how to cope with rules written in the 1930s and updated throughout the decades with advisories from regulators. Nowadays, they worry about not only their paid advertisements but also their tweets, Facebook postings, blog posts, thought-leadership papers and other means of marketing. They fret about even posting responses to criticisms on crowdsourced review sites like Yelp.com.
“We are handcuffed about what we can say,” said Andrea Graham, an adviser at Applied Financial Planning Inc. in Irvine and one of the “Money Guys,” advisers who participate in radio discussions on financial matters. “We’re not even allowed to post a reply that our compliance department says we cannot reply.”
In another scenario, one email sent to more than two people might be considered marketing, said David Hutchison, a partner at Newport Beach-based Triad Investment Management, which has $126 million in assets under management.
The regulations are like a game of golf where you keep your own score, Hutchinson said.
“The regulators can come back and watch every video and penalize you whenever they think you made the wrong call.”
Meanwhile, a U.S. Department of Labor regulation scheduled to take effect this month has much of the Orange County financial advisory industry in an uproar. It will require brokers of retirement accounts to act in their clients’ best interest.
The labor department under the new Trump administration said it may repeal or revise the rule after it conducts an economic review, a process that includes public comment.
The labor department edict raises the industry’s standards and some OC advisers have begun implementing it. Critics say the rule eliminates commissions, increases the cost of advice, and reduces services to small investors.
“This rule will prevent 60 to 80 million people from getting investment advice,” said Robert Micone, a financial consultant who’s also one of the “Money Guys.”
“There are unelected statist bureaucrats telling us what we can sell and clients what they can buy.”
