Registered investment advisers (RIAs) have new SEC rules to follow when it comes to marketing their services and advertising performance.
The SEC’s new marketing rule, which went into effect in May 2022, aims to modernize the framework for investment adviser marketing activities while enhancing investor protections.
As an RIA, it’s crucial to understand the key provisions of this new rule so you can effectively market your services while avoiding common advertising issues.
In this blog post, we’ll provide an overview of the new marketing rule and outline some strategies RIAs can use to market themselves while adhering to the SEC’s guidelines.
An Overview of the SEC’s New Marketing Rule for RIAs
The SEC’s new marketing rule replaces the previous advertising rule, which had remained largely unchanged since its adoption in 1961. Known formally as Rule 206(4)-1, the new rule establishes a single framework for regulating adviser marketing communications, bringing them more in line with today’s digital landscape.
Some key aspects of the marketing rule include:
- Consolidating Regulations: The new rule consolidates various SEC marketing regulations and guidance into a single rule. This replaces the previous advertising rule along with other regulations like the cash solicitation rule.
- Applies Broadly: The marketing rule applies broadly to all advertisements and other communications by an SEC-registered investment adviser or its supervised persons that offer the investment adviser’s investment advisory services.
- General Prohibitions: The marketing rule contains seven general prohibitions on adviser marketing activities. These include prohibitions on making misleading statements, omitting material facts, and discussing performance results without providing appropriate context.
- Expanded Options for Testimonials: The new rule provides more flexibility for RIAs to use testimonials and endorsements in their marketing. However, any testimonials still need to clearly and prominently disclose the author’s relationship with the RIA.
- Hypothetical Performance: The rule imposes strict parameters around using hypothetical performance in marketing materials. Advisers must adopt and implement policies and procedures designed to ensure that hypothetical performance is relevant to the likely financial situation and investment objectives of the recipient.
Marketing Rule Compliance Deadline
The marketing rule became effective on May 4, 2022. However, the SEC provided a transition period to give advisers time to come into full compliance.
The compliance date for most provisions in the new marketing rule was November 4, 2022. This means RIAs must now have updated marketing strategies and materials that adhere to the SEC’s requirements under the new rule.
Some requirements, such as the rule’s books and records amendments, had a compliance date of May 4, 2022. So, RIAs should already be retaining records related to marketing activities in line with the new rule 204-2.
Crafting Compliant RIA Marketing Strategies
When developing marketing strategies, RIAs must ensure all advertisements and communications comply with the marketing rule’s provisions. Here are some tips for crafting marketing campaigns that align with the SEC’s regulations:
Focus on Informing, Not Selling
The marketing rule emphasizes that advertisements must be designed to inform clients and prospective clients about an adviser’s business, not to sell services. Avoid language aimed at pressuring prospective clients to hire you or make exaggerated claims about potential results.
Ensure Transparency
Content should be transparent about risks, fees, services provided, and any other facts clients need to make informed decisions. Omitting material facts is prohibited under the marketing rule.
Review Performance Advertising Requirements
If including the prior performance of accounts you manage, carefully review the marketing rule’s specific requirements around performance advertising. This includes parameters for presenting performance time periods, what accounts must be included, and appropriate disclaimers.
Vet Any Testimonials
The use of testimonials and endorsements is allowed but must adhere to strict disclosure requirements. Ensure any testimonials clearly and prominently reveal the author’s relationship to your firm.
Verify Hypothetical Performance
Any hypothetical performance examples must comply with the marketing rule’s stringent parameters around ensuring they are relevant to the intended audience. Have policies and procedures in place to verify hypothetical performance content.
Maintain Substantiation
Your RIA should preserve documentation substantiating statements made in marketing materials. Whether it’s performance data, awards earned, or other claims – be able to back up what you use in advertisements.
By keeping these guidelines in mind, your RIA can implement marketing strategies that align with SEC regulations and provide transparency to potential clients. Work closely with an SEC compliance attorney to review any marketing initiatives.
Additional Considerations for Investment Adviser Marketing
Beyond adhering to the SEC’s marketing rule, RIAs should also keep these additional considerations in mind when marketing their services:
- Avoid Guarantees: Be cautious about making any exaggerated or unwarranted guarantees about investment performance or your services.
- Document Marketing Efforts: Keep records of your marketing activities and retain copies of all advertisements and communications.
- Training: Educate your staff on the marketing rules so any marketing-related activities they conduct adhere to regulations.
- Social Media: Marketing through social platforms is permitted but must comply with the marketing rule. Have policies for appropriate social media usage by your firm and supervised persons.
- State Regulations: If registered at the state level, consider any additional state regulations related to investment adviser marketing that may apply to your activities.
Marketing Your RIA’s Specialties
A key component of most RIA marketing plans is highlighting your firm’s specialties and knowledge.
Some effective ways to showcase your services while complying with regulations include:
- Focusing on Niches: Demonstrate your knowledge in particular niches like socially responsible investing or services for high-net-worth families.
- Sharing Your Process: Explain your investment research process, advisory approaches, or other unique aspects of how you serve clients.
- Featuring Case Studies: anonymized case studies and client stories can effectively convey how you tailor services.
- Listing Services: Clearly communicate the range of investment advisory and financial planning services you provide.
- Bios: have bios for your leadership team and advisors detailing qualifications and credentials.
The marketing rule provides the flexibility to creatively convey your firm’s value proposition while requiring transparency about risks and results. Keep regulations top of mind, but don’t let them stifle your ability to reach your ideal clients.
Leveraging Digital Marketing for RIAs
Digital marketing is an excellent avenue for getting your RIA’s message out to potential clients in compliance with regulations.
Some examples of digital tactics include:
- Search Engine Optimization (SEO): Optimize your website and blog content to rank highly in search engines for relevant keywords. For example, “Atlanta financial advisor” or “socially responsible investing.”
- Content Creation: Regularly create compliant content like blog posts, videos, and webinars to attract and inform potential clients.
- Social Media: Maintain active yet compliant profiles on platforms like LinkedIn, Twitter, and Facebook to build engagement.
- Paid Ads: Run paid search, social media, or display ad campaigns to reach investors actively looking for advisory services. Ad disclosures must follow marketing rules.
- Retargeting Ads: Remind website visitors about your firm and offerings through targeted ads on other sites they browse.
- Website User Experience: Ensure your website is easy to navigate, conveys your knowledge, and contains required disclosures.
The marketing rule permits the use of testimonials and endorsements in digital marketing and social media but with appropriate disclosures. This provides opportunities to showcase client satisfaction online while adhering to regulations.
RIA Advertising Regulations Are Evolving. Are You Ready?
Evolutions in RIA advertising rules grant new opportunities while raising new complexity. Investing in robust legal and compliance support provides confidence as the regulatory landscape changes. My RIA Lawyer’s seasoned team offers trusted guidance at every step.
Their team can help you craft a compliant, effective marketing strategy tailored to your unique needs. From performance advertising to client endorsements, they empower you to follow the rules while standing out. Contact My RIA Lawyer to discuss navigating today’s RIA marketing regulations.
