Independent Financial Advisors face compliance issues when using Social Media

What seemed like a very simple questions was asked recently in a discusssion group on Linkedin and it went a little something like this:

Do any of you blog or use Twitter?
I am curious as to how much compliance is involved…..

FSA-complianceNow, the group in question was for IFAs or Independent Financial Advisor’s who are regulated by the FSA in the United kingdom (Financial Services Authority) and the rules of compliance, set down by Law, are enforced by the FSA who ensure that advisor’s do not over sell the potential benefits of their products or services with outlandish promises.

All well and good we say but the problem is confounding many IFAs in regards what they can and cannot do, mostly because the FAS has not clarified its position on blogs, social media, twitter, or facebook and the like.

This occurs because any publically written statement by a financial advisory business must pass compliance, otherwise large fines and even legal action may be taken so many find themselves having to ignore social media (and new technology) for fear of having their licenses revoked or getting creative with how they use the tools.

The simple answer is not to use social media to sell a particular product, as this would break compliance, but it can be used in a networking  capacity  to involve the advisor’s in groups and allow them to engage with users discussions and address the problems by understanding them in the first instance from a grass roots level.

Well, at least, thats why I was involved in the discussion, to try and research the views of IFAs on the social media frontier and how they where engaging in it.  Seems I still had to revert to explaining the social media itself though and await further feedback after the clarification.  Heres where we stand at the moment. ( I have removed all names because I wanted to… so there… and anyway its probably against compliance to even know or write the name of a financial advisor down so I’m making sure I don’t end up in court… I’m being serious, have you read their handbook?).

Question:

Do any of you blog or use Twitter?
I am curious as to how much compliance is involved…..

Answers:

First, a blog is an on-line diary. I personally do not think everyone needs to live my life with me through the internet.
Second, Twitter is used to mass email information to people.

Last, neither would be FINRA compliant if used to promote or carry on your business if you hold a license.
Short and simple answer.

Answers:

Answer One is right, and FINRA has come out and said that blogging, Twitter, etc., are all advertising, so you would have to get what you want to say pre-approved by your compliance department; impossible. So it’s not allowed, almost by definition.

Answers:

Why can’t you have a twitter account/blog where you talk very generically about what a wealth advisor could potentially do for a client? Compliance is going to have to come into the 21st century at some point, no? Prez Obama skillfully used social media to win the election…surely he will help our industry enjoy some of the same benefits? ( I can barely keep a srtaight face)
I do believe there is some gray area here, remember how taboo emails to clients were back in the day?

Answers:

All written communication must be pre-approved before sending out. Email through a wrench into the works, so firms are reviewing those after the fact. However, they have strict guidelines at to what can be sent and the approval process.

Right now, the industry has not come up with a way to deal with Twitter. In general, any email going out to 10 or more must be pre-approved. Twitter, by default, goes out to many at once. So, by our current rules, would have to be pre-approved before sending.

As you have indicated, it can be a very effective tool. But, its use could be a potential compliance nightmare. I cannot guess when this will change.

As far as sending out generic financial advisor commentary, that will surely lead to specific questions and business in our profession. It is too easily violated. I am sure we shall see changes as the technology advances. But, remember the reason for these restrictions. Too many times in the past people have fallen prey to and been hurt by incorrect dissemination of product information and promises of performance. The rules have been made to protect the consumer and the advisor.

I hope this helps.

Answers:

I think the idea is to raise your profile through networking, maybe letting people know what your expertise is and then they can contact you if they are interested in you. I would like to keep in touch with my peers in this industry to learn from their experiences. IFA Life is a brilliant networking group.

Phil Calvert says people buy from people, so raise your profile by joining groups and getting known in your working environment.
Yes I use Twitter, Linkedin, Business Facebook , Ecademy, Sagazone and Focus and a few local ones.

Answers:

An idea is to have a planned blog where you submit several blog posts to compliance for pre-approval and post them as needed. I believe the same system could work for twitter.

Answers:

If blogging and twittering are advertising, is it a violation to post here without prior approval? Perhaps the post-post rule used for e-mail could be somehow extended to generic posting.

Answers:

To answer that question, in part, most of what we do on LinkedIn is a violation of rules. For example, it is my understanding that any “financial advisor” who has a recommendation from someone on their LinkedIn profile is in violation of rules. Recommendations are not allowed for compliance purposes. At least that’s what a national compliance firm told me (I’m independent and hire a compliance firm to assist me with some stuff).

That said, I believe **** offers a great suggestion. If you have a compliance department, it would be relatively easy to submit a host of potential posts for approval. If they are approved you can post each of them over a period of time.

Hosting blogs and the like are perfectly compliant as long as the material posted is fairly generic and as long as you have the proper disclosures on your blog, twitter account, etc. In fact, I’m looking into establishing one for myself.

Justin decides its time to get involved:

First off I think I need to clarify a point before I join this discussion.

I recently requested permission to join this group with this exact question in mind that ***** ***** has begun. The reason being is that I have begun consultancy with a client who are an established name and offer independent financial advice and tax advice as their main services here in Spain and Europe wide.

Taking into account that the laws are different on a national and regional level I wanted to ask the members of this group if they are utilizing social media and if so what their experiences have been, both good and bad, positive or negative.

Unfortunately it seems that compliance is a major barrier to entry in this medium and that is an issue we are addressing at the moment for me to understand its restrictions and my client to understand how the on line tools available can or could be utilized.

Reading though the list of responses here I was however completely dismayed and feel the need to pipe up and maybe clarify a few points, possibly for everyone’s benefit, including my own, so please feel free to play devils advocate.

To address ***** ***** on your first comment. Blogs are renowned for being “diaries” and indeed to some extent they can still be referred to as that, however that is not exactly the case. Blogs have developed in the corporate and business environment to be a lot more than a record of person feelings and events, instead they have become a means to quantity and explain very specialist and specific subjects based around the experiences of the individual.

To clarify, if you where to have a blog *****, I would be very interested in reading and understanding your specific point of view on the last 12 months, the economic changes and the consequences of this on markets and currencies based on your own experience and expertise, much more so than reading some mundane report filled to overflowing with data and jargon that makes little or no sense to me as a layman.

By this very same process I would make the decision to monitor your blog via RSS subscriptions or email subscriptions for further updates because the information you are providing makes sense to me and engages me on a much more personal level than the previously mentioned statistical report.

Consequently I would would be able to, by the merit and quality of the information alone to decide to share this information with my networks, family or friends if I deem it to be of value.

This is where something like Twitter would come into the mix. If I decide to share this information I do so of my own free will and can immediately send it to X number of people because I want to share this point of view.

This is not mass emailing.

Far from it in fact, this is a very valuable network I have created with professionals and clients over a long period of time who will benefit from exposure to a more relevant point of view, namely yours, in this example.

You are not selling me (or the recipients/network) anything, no product, no service, no consultancy.

Ok, I tell a lie, you are selling me something, your inadvertently selling your personality, expertise and opinion. But your offering it for free. (I know that’s a double negative right there).

Following on from that, ***** has obviously offered a good work around that meets compliance requirements in regards submitting articles or information in advance, then once approved, publishing them via the blog platform.

Again this would work when we delve into the twitter community, because the compliance has been met in advance, then all you are doing is bringing attention to information that is available, and should be available, for them to read and digest.

In regards usage ***** ***** has the idea quantified correctly. It is about raising your profile and networking with a range of different social aspects, both peers and colleagues to laymen and business people. Surely you do this in the real world in B2B groups and business conferences or exhibitions? The virtual aspect is actually no different.

Please feel free to play devils advocate, if what I have wrote is in no way feasible or applicable, I admit I don’t know your industry regulations as well as the experts so am simply trying to understand the big picture and apologies to ***** *****, I am not intentionally focusing on you, but felt the points you made should be addressed.

Answers:

Justin,

Your points are valid, but the problem with our industry is that a few bad apples have ruined it for the rest of us. So, instead of penalizing those who have been misleading with their advertisements, regulatory agencies have blanketed all of us to abide by a set of rules which, intentionally or not, have made us less able to generate business through viable resources like blogging and using twitter or other social media.

For example, I’m not allowed to use any testimonials of any kind which is why my LinkedIn profile lacks any…or at least I’ve hidden them so they’re not visible to the general public, which is required in my case. Blog entries and twitter comments need to be pretty vanilla (according to the independent compliance firm I hired) because an abundance of opinions could be construed as investment advice which is not allowed unless we engage our clients in an advisory capacity.

Tweets and blog posts are considered advertisements and, therefore, we must abide by the advertisement rules our industry has laid out for us. Cumbersome? Yes. But it’s not impossible to overcome. It does take a tremendous amount of work to figure out the best way to attack it though.

Answers:

Hi Justin,
I was delighted to hear from you today. Thank you for all your advice. I will be contacting my network company Tenet, who do the compliance approvals, and find out more on this subject.

They are one of the largest networks that look after IFA’s. Maybe these guys can come up some ideas too as they will benefit when we do more business. Our industry should not be held back by age old regulations that could easily reviewed and updated.

As Philip Calvert (Marketing Guru) – IFA Life) say’s ” If your not on the train you’ll be under it”. People tend not to like change but we have to go with the flow or we will be left behind. Our industry is lagging behind and must catch up. I will be listening intently to all the other comments made on this subject and especially to tuned in to you Justin.  Thanks again.

Answers:

If I am interpreting your above comment correctly, you stole the words right out of my mouth. I can’t imagine financial advisors are posting and sharing thoughts on LinkedIn just to share “best practices” with other advisors? I’m sure you can sense my sarcasm. There is no difference between posting comments on a public website such as this one, and having a blog or utilizing Twitter.

Answers:

Right-on, *****.

I’d also like to flip the reg discussion (warning – I am an actuary too). I hate having to clear stuff as much as anybody. But I think it goes beyond the realm of “a few bad apples”. Finance is complicated. Beyond even Greenspan. A “little” peer review is good for the soul and for the end result too. So let’s flip the discussion and try to see how we can have our cake and eat it too.

And thats where the discussion stands at the moment.  Why have I bought this up?  Well I found the whole thing very interesting that the Financial Services where being held so strictly to the laws of compliance it was actually serviing to hold them back from engaging in new technology while, quite ironically, allowing other more “unscrupuolous” and unregulated finaancial types go unhindered.

I guess every industry will have its issues that it needs to face on the introduction of any new communication technology, but this one in particular seems incredibly complex and a little archaic. Will let you know more as I get further research completed but of course, if your an IFA and happen to be reading this, do feel free to comment here (if your not an IFA… well, im feeling generous, you can comment as well, so long as its sensible.)