Harnessing the Power of Testimonials for Financial Advisors

Client testimonials have long been powerful tools for businesses, providing genuine feedback and validating services. While the financial sector has been restricted in using this tactic, the times are changing.

Understanding the Historical Landscape

Historically, the Securities and Exchange Commission (SEC) placed strict limitations on registered investment advisor (RIA) marketing methods. Born out of consumer protection concerns, these laws dating back to the 1970s forbade the use of client testimonials in advertising. The digital era, however, brought about a paradigm shift, as consumer habits evolved—95% of consumers now rely on online reviews before engaging with a service.

Acknowledging this change, in May 2021, the SEC revisited its stance, permitting financial advisors to integrate testimonials into their marketing strategies.

Unpacking the SEC’s New Guidelines

With this newfound freedom comes responsibility. The SEC outlines specific criteria for the utilization of testimonials:

  1. Source of Testimonials: Advisors can garner testimonials directly from clients or third-party rating platforms like Google Reviews, Yelp, or Facebook. However, it’s essential to note that testimonial providers automatically gain the “promotor” status.
  2. Disclosures and Transparency: Key guidelines include:
    • Publicly declaring the nature of the relationship between the financial advisor and the testimonial provider.
    • Openly acknowledging any paid testimonials.
    • Ensuring testimonial disclosures are easily accessible and employ layman’s terms.
    • Highlighting potential conflicts of interest.
    • Clearly indicating if the testimonial originates from a current or past client.

Adherence to these stipulations is non-negotiable to avoid potential penalization.

The Value of Testimonials in Financial Advisor Marketing

Testimonials serve as trust bridges, providing real-life instances of an advisor’s efficacy and reliability. Their authentic nature resonates with potential clients, painting a realistic picture of what to expect. To align with the SEC’s updated rules:

Curating the Perfect Testimonials

In the sea of testimonials, how do you pinpoint the most impactful ones?

  • Relevance: Choose reviews that emphasize the specific services or qualities you aim to spotlight.
  • Demographics: Ensure the testimonial resonates with your target clientele.
  • Quantifiable Metrics: Testimonials boasting tangible results have a pronounced impact.

If you find yourself short on testimonials, consider proactive approaches like:

  • Net Promotor Score Polls: An NPS evaluates client satisfaction and gauges their likelihood of recommending your services.
  • Feedback Requests: Post-service follow-up emails can invite clients to share their experience.
  • Incentives: Offering referral rewards can be a catalyst for testimonial submissions. Just remember to declare any incentivized reviews transparently.

Navigating the Testimonial Terrain with Experts

While the inclusion of testimonials offers numerous advantages, its execution requires precision. Make sure you are communicating with your compliance experts to stay within the guidance they provide. 

Maribeth Kuzmeski, PhD, President of Red Zone Marketing, is a marketing strategist, advisor to financial services companies, bestselling author of nine books, and a professional speaker rated as a Top 25 C-Suite Speaker as seen in Meetings & Conventions Magazine. She speaks on topics including marketing, branding, sales, and customer service.

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