Two months after the November 4, 2022 deadline for RIAs to comply with updated SEC marketing rules, advisors have seemed slow to take advantage of the potential offered by the change.
“The new rule lays out specific disclosures that can accompany a social media post or online advertisement,” says Brian Thorp, founder of Wealthtender, an online review platform for financial advisors that is specifically designed to comply with the SEC’s new marketing rule. “Financial advisors can now proactively market their business by collecting testimonials.”
Thorp would like his site to become a one-stop directory and review site for customers looking for financial advisors — in other words, a sort of “Yelp for financial advisors,” as he describes it.
Wealthtender is first and foremost a directory. Users can search for advisors by name, firm, location, specialty, professional credentials, or keyword. However, the site also publishes content, offering hundreds of articles about personal finance, including niche stories such as financial planning for dentists. Within a story, Wealthtender links to advisors who specialize in related fields. For a flat rate that ranges from $29 to $59 a month, depending upon the tier selected, advisors receive a profile, are featured in content localized to their area, and can manage the review feature on their profile.
When the review feature is turned on, an advisor can invite clients to write a review. Alternately, they can utilize a customized embed code for their website that allows them to collect and publish reviews with all of the appropriate SEC compliant disclosures fully embedded.
Once a pending review is submitted, the advisor receives an e-mail with a link to all the details of the review, which provides a digital record should the advisor be audited by the SEC. The advisor or their compliance officer can also add appropriate disclosures (which can later be modified, if necessary).
Advisors can’t selectively delete bad reviews or cherry-pick the good ones — those tactics are against SEC rules — but they can disable the review feature. Additionally, Wealthtender has been recognized as a review platform by Google. Once an advisor has collected about five online reviews, their average gold stars and preview testimonials will begin to show up in Google results.
Despite the appeal of these features, advisors have been lukewarm about leveraging testimonials. The website grew from 40 advisors at the start of 2022 to about 220 as of January 2023, but only about 15 advisors utilize the testimonial features. This could be due in part to the fact that only SEC-registered advisors — or advisors in states that follow SEC rules as a matter of policy — can solicit testimonials. Many smaller firms and advisors fall under distinct state regulations that haven’t been updated.
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Savvy Wealth is a venture-capital-backed RIA tech startup founded in 2021, and it has since acquired or added six independent wealth managers with about $95 million in AUM — with an additional $300 million under contract to transition over. The firm’s head of marketing, Rajat Deva, says that he’s eager to use testimonials to help generate leads, “but we’re still thinking through the strategy of how to best implement them with our advisors.”
However, Deva understands the hesitancy that many advisors have regarding testimonials. “For decades, rules didn’t allow advisors to take advantage of an avenue like this, so many are uncomfortable with it,” he says. “That’s probably because the guidance from the SEC on how to implement testimonials is questionable in its own right,” Deva said.
Stacy Sizemore, the chief compliance officer for 26 firms in Oregon, California, Texas, Georgia, Florida, Michigan, Pennsylvania, and New York that collectively manage around $9 billion in assets, agrees. “Many [companies] are pretty nervous about using testimonials under the new rule because the SEC has not been able to go out, examine very many firms, and publish their findings,” she says.
For that reason, Sizemore is telling her clients to hold off on using testimonials. The SEC hasn’t begun conducting exams and questioning RIAs about their practices related to the new rules, she said, so the agency’s interpretation is still unclear.
“We haven’t been able to get feedback from our peers — ‘Hey, what did the SEC say to do? Were your disclosures adequate? Is everything good on your website? On your social media?’ Things like that. So it’s nerve-racking,” Sizemore said. Only two of Sizemore’s 26 advisory firms have begun to use testimonials, and she said that she tried to talk them out of it, at least for now.
Thorp believes that the most challenging compliance hurdle is around limits on performance advertising. “Many CCOs [had] hoped the SEC would provide additional color on performance advertising, [but] it largely hasn’t,” says Thorp, noting that the absence of clarity has led to a “Let’s see what everyone else does first” approach.
Thorp, who has worked for over 25 years in financial services and who formerly served as the head of the financial advisor platforms at Invesco, is nevertheless optimistic about the future. He says that he’s starting to see an uptick in the use of testimonials by advisors — and hearing anecdotal evidence of the trend when he talks to them.
“Even though the SEC permitted advisors to get started a few months ago, it really wasn’t until this deadline passed [that] the majority of advisors and firms started to feel more comfortable with seriously considering the opportunity,” Thorp says.
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